Bitcoin extended its rally on Wednesday, breaking above the US$13,000 level to hit a new all-time high even as questions raged about the cryptocurrency’s real value and fears of a dangerous bubble.
“There is a lot of money flowing into bitcoin right now, mostly motivated by ‘fear of missing out’ and greed,” Leonhard Weese, president of the Bitcoin Association of Hong Kong, told Reuters.
The digital currency received a boost after an announcement last Friday by the main US derivatives regulator that it would allow CME Group and CBOE Global Markets to list bitcoin futures contracts.
The move opens the door to added regulation but also more mainstream adoption, as bitcoin futures and other derivatives would make it easier to trade the new asset class.
“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,” Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto, told Reuters.
Bitcoin’s climb of over 10-fold from below US$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 center 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,” Schamotta said.
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