TOKYO/NEW YORK: Bitcoin hit a fresh record of $14,000 Thursday as investors piled in, triggering a warning the cryptocurrency was “like a charging train with no brakes” which would inevitably slip back.
It touched a new a high of $14,400 in Asian trade before slipping back to $13,900, according to Bloomberg News.
The rally came just a day after the virtual currency, which has been used to buy everything from an ice cream to a pint of beer, hit the $12,000 mark for the first time.
Bitcoin — which came into being in 2009 as a bit of encrypted software and has no central bank backing it — has risen from a 2017 low of $752 in mid-January, and surged dramatically in the past month.
The increased interest has been driven by growing acceptance among traditional investors of an innovation once considered the preserve of computer nerds and financial experts.
US regulators last week cleared the way for Bitcoin futures to trade on major exchanges, including the world´s biggest futures centre the Chicago Mercantile Exchange (CME).
But some, including the US Federal Reserve, have warned against dabbling in Bitcoin as it could threaten financial stability, and fears of a bubble have increased as the price has soared.
“Bitcoin now seems like a charging train with no brakes,” said Shane Chanel, from Sydney-based ASR Wealth Advisers. “There is an unfathomable amount of new participants piling into the cryptocurrency market.”
Bu he warned: “Once the hype slows down, we will most certainly see some sort of correction.”
Transactions happen when heavily encrypted codes are passed across a computer network.
Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.
“Simply the perception in households around the world that the CME and the CBOE are providing legitimacy to bitcoin is really what is driving the massive rally here,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
Bitcoin’s ascent of over 10-fold from below $1,000 at the start of the year has drawn regulatory scrutiny around the world.
Some high profile individuals such as Nobel Prize-winning economist Joseph Stiglitz have said the cryptocurrency should be outlawed.
“It took a long time to establish the methodology and the way bitcoin was traded. The original appeal came from the fact they were unregulated. However it’s clearly moved out of those shadows and into centre stage,” said Mick McCarthy, CMC Markets’ chief market strategist in Sydney.
“We are in the throes of a bubble market, and one of the characteristics of a bubble market is that there is no way to know when the bubble will burst.”
The current craze for bitcoin, and cryptocurrencies in general, have been likened by some to the 17th-century Dutch tulip mania and more recently the dotcom bubble.
“If you look at this sort of pattern it has repeated itself many, many times. The only way it ends is when sentiment shifts and that’s a deeply unpredictable thing,” Cambridge Global Payments’ Schamotta said.