The price of cryptocurrency bitcoin surged to 11,800 dollars on Sunday, December 4, 2017 afternoon – its highest level yet.
Bitcoin, a peer-to-peer digital currency system created in 2009 that is not propped up by a central bank, has seen its value increase ten-fold, but with dramatic fluctuations, this year.
Central bankers have warned of bitcoin’s unpredictability and of indications that it constitutes a bubble asset that could come crashing down in value.
On Friday, the cryptocurrency got a boost on its way to becoming an established financial product with a statement from the world’s largest derivatives exchange, CME, that futures contracts for bitcoin would be available in two weeks time.
After surpassing the 11,000 dollar threshold on Wednesday, the currency fell to around 9,000 dollars the following day.
The Bitcoin Bubble Will Definitely Bust – Banking Experts
Several international bankers have sounded a warning about the mega risks involved in embracing the digital currency, which this week soared to a new record high of more than $8,000. Six years ago, it traded for just one dollar.
“It’s the exact definition of a bubble,” the head of Swiss banking giant Credit Suisse, Tidjane Thiam, warned recently in comments that immediately sparked an uproar on social media among bitcoin’s supporters.
The head of the French central bank or Banque de France, Francois Villeroy de Galhau, warned in the summer: “People are using the bitcoin today are clearly doing it at their own risk and at their own peril.”
Nobel laureate, Jean Tirole, also insisted that the current bitcoin boom was a “bubble”.
“It’s something that has no intrinsic value,” he said on the sidelines of a conference in Paris this week.
“It could collapse from one day to the next. I would be completely against French banks, for example, investing in bitcoin.”
Bitcoin is not regulated, but is traded on specialist platforms. It has no legal exchange rate and no central bank backing it. Launched in 2009 as a bit of encrypted software written by someone using the Japanese-sounding name Satoshi Nakamoto, bitcoin is controlled and regulated by its community of users.
Economists generally are of the view that Bitcoin is the monetary equivalent of Uber, since it bypasses central bank regulation and can be used for illicit purposes and are highly speculative by nature.
“Bitcoin? It’s about ‘Uber-ising’ currency, about not having a central bank that decides the price,” said Ludovic Subran, chief economist at credit insurer Euler Hermes, referring to Uber, the ride-hailing app that has set the cat among the pigeons in the taxi sector in recent years.
Bitcoin supporters are of the view that cynics are raising issues irrelevant to the merits of the cryptocurrency.
“Yes, it’s exactly that: it bypasses a central regulatory authority. That’s the genius of this invention,” agreed Yves Choueifaty, founder of the Paris-based asset management firm Tobam, which this week launched the first European fund investing in bitcoin.