‘No way to know when bubble will burst’: Bitcoin breaks through $US13,000

Bitcoin extended its rally on Wednesday, breaking above $US13,000 to a record high despite questions about the cryptocurrency’s real value and worries about a dangerous bubble.

Bitcoin received a boost after Friday’s announcement by the main U.S. derivatives regulator that it would allow CME Group Inc and CBOE Global Markets to list bitcoin futures contracts.

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Bitcoin rockets to another record high

Bitcoin has extended its eye-popping rally, breaking above $13,000 to a record high despite questions about the cryptocurrency’s real value and worries about a dangerous bubble.

The move opens the door to added regulation but also more mainstream adoption, as bitcoin futures and other derivatives would make it easier to trade the new asset class.

“Simply the perception in households around the world that the CME and the CBOE are providing legitimacy to bitcoin is really what is driving the massive rally here,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.

Bitcoin’s ascent of over 10-fold from below $US

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1,000 at the start of the year has drawn regulatory scrutiny around the world.

Some high profile individuals such as Nobel Prize-winning economist Joseph Stiglitz have said the cryptocurrency should be outlawed.

“It took a long time to establish the methodology and the way bitcoin was traded. The original appeal came from the fact they were unregulated. However it’s clearly moved out of those shadows and into centre stage,” said Mick McCarthy, CMC Markets’ chief market strategist in Sydney.

“We are in the throes of a bubble market, and one of the characteristics of a bubble market is that there is no way to know when the bubble will burst.”

The current craze for bitcoin, and cryptocurrencies in general, have been likened by some to the 17th century Dutch tulip mania and more recently the dotcom bubble.

“If you look at this sort of pattern it has repeated itself many, many times. The only way it ends is when sentiment shifts and that’s a deeply unpredictable thing,” Cambridge Global Payments’ Schamotta said.

Bitcoin was up 12.42 per cent at $13,127.01 on the Luxembourg-based Bitstamp exchange after surging to the record peak of $13,127.01.

“There is a lot of money flowing into bitcoin right now, mostly motivated by “fear of missing out” and greed,” said Leonhard Weese, president of the Bitcoin Association of Hong Kong. 

The largest cryptocurrency by market value has soared from less than $US1,000 at the start of the year as optimism climbs for the distributed ledger technology known as blockchain that is at the heart of bitcoin. The price surge has been accompanied by a growing chorus of warnings that the speculative frenzy is an asset bubble poised to burst.

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Cboe Global Markets has said it will start trading bitcoin futures on December 10, while CME Group Inc.’s contracts are set to debut on December 18. Nasdaq is planning to offer futures in 2018, according to a person familiar with the matter. Cantor Fitzgerald LP’s Cantor Exchange is creating a bitcoin derivative, and startup LedgerX already offers options.

More to come


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