Tech

Bitcoin currency tops S$1,250 as enthusiasm grows

Bitcoin currency tops S$1,250 as enthusiasm grows
There are more than 12 million Bitcoins in circulation and merchants are starting to accept them. Photo: Reuters
Virtual currency rallies on interest from investors in China and United States
Published: 8:21 AM, November 29, 2013

PORTLAND — The price of Bitcoin has surpassed US$1,000 (S$1,250) on the Mt Gox online exchange, fuelled by speculators snapping up the virtual currency, as it gains wider acceptance.

Bitcoins, which exist as software and are not regulated by any country or banking authority, surged to a record US$1,073 yesterday, up more than 80-fold from a year earlier. The currency has rallied on growing interest from investors in China and the United States, while merchants are starting to accept Bitcoins for everything from Gummi bears to tuition fees.

The virtual currency gained credibility this month after law enforcement and securities agencies said in US Senate hearings that Bitcoin could be a legitimate means of exchange. The rally had gathered steam last month after regulators shut down the Silk Road Hidden website, where people could obtain guns, drugs and other illicit goods using Bitcoins, generating optimism that the digital money would become more widely used for legal purposes.

“Milestones do tend to provide some validation, even though they are entirely arbitrary,” said Mr Nicholas Colas, Chief Market Strategist at ConvergEx Group. “US$1,000 for a Bitcoin would draw attention and certainly gives people positive on the currency another reason to laugh at the naysayers.”

Bitcoin was introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto and there are rules governing its supply. New Bitcoins can only be created by solving complex problems embedded in the currency, keeping total growth limited. There are more than 12 million Bitcoins in circulation, according to Bitcoin Charts, a website that tracks activity across various exchanges.

Bitcoin is being used to pay for an extensive range of items on the Internet. The virtual currency can also be traded without being tracked, potentially reducing banking-transaction fees and making it an attractive tender for those seeking to buy and sell via the Web or in stores.

When Silk Road was shut down, the virtual currency lost a third of its value within days as holders sold, predicting a crackdown. Instead, the willingness of the authorities to stamp out illegitimate use has come to be seen as an endorsement for Bitcoins, making users and investors more comfortable taking risks with digital money.

Bitcoin also gained further legitimacy and attention when a subsidiary of Baidu, China’s top search engine, started accepting Bitcoins last month. Chinese Bitcoin activity has exploded, with the number of yuan-based trades jumping 30-fold in the past two months and making BTC China the top online exchange by volume. BLOOMBERG