Yahoo Finance Why the price of bitcoin is skyrocketing again
The price of Bitcoin, the world's most popular virtual, digital currency, is on the rise again. After trading in a range of $200 to $250 for most of the year, the price of one Bitcoin shot up to $500 this week, although it has since fallen back to $392 on Thursday.
A great surge to $1,000 at the end of 2013 ended in disaster for investors as the currency lost three-quarters of its value in ensuing months. But what's behind the latest rally and will it stick? Here are three possible explanations:
Perhaps questionable Chinese interest
As often happens with bitcoin price surges, a lot of the trading is coming out of China. And there is a social financial network called MMM Global growing massively in China that requires users to buy bitcoin and share it around with other members. The Financial Times has said MMM has elements typical of pyramid schemes. The site was founded by a former Russian legislator who was jailed for fraud over a pyramid scheme he operated in the 1990s.
China has also tightened capital controls recently, making it harder for its citizens to send money abroad. Some bitcoin buying may be related to efforts to get around the crackdown.
Growing legitimate business interest
At the Money 20/20 conference last week, many companies announced new bitcoin-based services. The Nasdaq (NDAQ), for example, will be recording transactions in private stocks using bitcoin's public ledger, known as the blockchain. And Mastercard (MA) joined the long list of establishment institutions investing in bitcoin startups. And, two weeks ago, the European Union's top court agreed that virtual currencies like bitcoin can be traded like established currencies without triggering taxes applied to sales of goods and services. Past rallies have been linked with speculative bets that these kinds of deals and rulings would popularize the cryptocurrency and lead to greater demand which would push up the price.
Jamie Dimon
The always opinionated CEO of JPMorgan Chase (JPM) says bitcoin has no future -- governments will shut it down, he said at Fortune's Global Forum on Wednesday. “Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” Dimon said.
Coming from the the guy who bought Bear Stearns and WaMu and missed those billions of dollars of crazy trades by the London Whale, Dimon's remarks may be attracting contrarians to bet against the big bank CEO. Probably not many, but with bitcoin, you never know.
