HONG KONG: Bitcoin neared record highs Thursday with the surging digital currency tipped to become a new safe haven asset as the world grapples with growing economic uncertainty.
The unit broke the $1,100 barrier on the Bitcoin Price Index, an average of major exchanges, to continue a dizzying rise that made it the best performing currency of 2016.
It has fluctuated wildly since it was created in 2009 and lost three quarters of its value when it plummeted from its previous BPI high of $1,165.89 in 2013.
And news of a major bitcoin theft by hackers in August sent its price plunging by more than 20 percent.
But analysts say its volatility will ease as volumes grow and point to a strengthening US dollar and tightening currency and capital controls, as well as the rise of the digital economy, as major factors.
The chaotic withdrawal of high value bills in India and restrictions on buying foreign currency in China as the yuan slides against the dollar have also stoked demand, analysts say.
Exacerbating the rocketing demand is a tightening supply of fresh bitcoins.
The currency was always meant to have a finite number created, and more than three quarters of the planned 21 million bitcoins have already been ‘mined’.
Encrypted digital coins are created by supercomputers and then traded online or exchanged for goods and services.
Vinny Lingham, a bitcoin expert and CEO of US digital identity protection startup Civic, cited the strengthening dollar and uncertainty in emerging markets around US President-elect Donald Trump as boosting the currency’s value. He has predicted bitcoin will be worth about $3,000 by the end of 2017.
“Bitcoin is reacting as a safe haven,” he said.
Bitcoin now has a total market capitalisation of about $18 billion —far more than other so-called “crypto-currencies” although a fraction of the value of other globally traded commodities.