Bitcoin made headlines by late Sunday when it surged above $1,000 for the first time in three years, marking a notable outperformance against all central-bank issued currencies with a 125% percent jump in 2016.
The digital "cryptocurrency" has no central authority, and instead depends on thousands of computers across the world which authenticate transactions and add new bitcoins to the system. Yesterday, it jumped 2.5% to $1,022 on the Europe-based Bitstamp exchange, the highest level last seen around December 2013. As of writing, BTC/USD is up by 2.14% or $21.41 to trade at $1,019.77.
Though bitcoin is still ways off the record peak of $1,163 which it hit on the Bitstamp exchange in late 2013, there are now far more bitcoins in circulation: 12.5 are added to the system every 10 minutes. Its total worth is at an all-time high above $16 billion, placing its value at approximately similar as that of an average FTSE 100 firm.
Bitcoin has historically been exceedingly volatile; a prime example was a tenfold gain in its value in two months in late 2013 that took it to above $1,100, before a hack on the Mt. Gox exchange in Tokyo saw it dive steeply to under $400 in the following weeks, Nonetheless, the digital currency has been more stable for the past two years.
Its largest daily moves last year were roughly 10%, and that is still volatile compared with fiat currencies. But that was evidently lower than the trading of 2013, which witnessed daily price swings of as much as 40%.
The web-based currency may have been lifted in 2016 by boosted demand in China on the back of a 7% yearly decline in the value of the yuan—the Chinese currency’s weakest performance in more than two decades. Data reveals most bitcoin trading happens in China.
Bitcoin is utilized to move money across the world swiftly and anonymously, and does not come under the scope of any authority. This makes it appealing to those who desire to get around capital controls, such that of China’s. Besides that, bitcoin also attracts those who are anxious about a lack of supply of cash like in India, where Prime Minister Narendra Modi eradicated high-denomination bank notes from circulation last November.
Paul Gordon, a board member of the UK Digital Currency Association and co-founder of Quantave, stated that: “The growing war on cash, and capital controls, is making bitcoin look like a viable, if high risk, alternative.”
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