As bitcoin hit a record high for the sixth day in a row – moving past $11,000 and gaining more than $1,000 in just 12 hours – some are concerned the cryptocurrency is in a bubble that will soon burst.
According to a Reuters news report, after rising more than 1,000 percent since the start of the year, bitcoin rose as much as 15 percent on Wednesday. But by mid-afternoon in New York, it was trading at $9,500, down 3.7 percent on the day on Luxembourg-based Bitstamp, one of the largest and most liquid cryptocurrency exchanges. It then topped $10,000 for the first time in early Asia trading, before surging less than 12 hours later to reach $11,395.
“As many seasoned traders know all too well, anything that rockets higher, tends to fall down faster when the time comes, and the time will come,” said James Hughes, chief market analyst at FX broker AxiTrader.
Despite the bubble warnings, dozens of new crypto-hedge funds continue to enter the market. London-based Blockchain.info, one of the biggest global bitcoin wallet providers, also revealed that it had added a record number of new users on Tuesday, with more than 100,000 customers signing up, taking the total number to more than 19 million.
“What’s happening right now has nothing to do with bitcoin’s functionality as a currency – this is pure mania that’s taken hold,” said Garrick Hileman, a research fellow at the University of Cambridge’s Judge Business School, who also warned of the risk of the whole market collapsing entirely.
Bitcoin's rise accelerated in recent months, as exchanges such as CME Group and the Chicago Board Options Exchange announced plans to offer futures contracts for the cryptocurrency. This week, a source said that NASDAQ plans to launch a futures contract based on bitcoin in 2018.
And while there is fear the bubble will soon burst, others admit bitcoin’s price rise can go even higher.
“It’s got all the shapings of your tulip bubble chart, (but) that tells you nothing about where that price line could go depending on the number of people who wish to own it,” Standard Life’s head of investment strategy, Andrew Milligan, said. “Who is to say it doesn’t reach $100,000?”