Bitcoin has started 2017 with a bang, with its value hitting a three-year high of more than $1,000 (£815).
The nascent digital currency, which has been criticised as a vehicle for a range of nefarious characters from drug dealers to tax evaders to operate, outperformed all its central-bank-issued counterparts with a 125% climb in value in 2016.
Market watchers have suggested that the soaring value may have been boosted in the past year by increased demand in China on the back of a 7% fall in the value of the yuan; this was the Chinese currency’s weakest annual performance in more than 20 years. Data show most bitcoin trading is done in China, according to Reuters.
The currency is used to move money across the globe quickly and anonymously and is free of control from any central bank or government, making it attractive to those who want to get around capital controls.
It is also may appeal to those worried about a shortage of cash, as in India where the prime minister, Narendra Modi, removed high-denomination banknotes from circulation in November.
“The growing war on cash and capital controls is making bitcoin look like a viable, if high-risk, alternative,” said Paul Gordon, a board member of the UK Digital Currency Association and co-founder of Quantave, a firm that seeks to make it easier for institutional investors to access digital currency exchanges.
Bitcoin is still some way off its all-time high of $1,163 reached on the Bitstamp exchange in late 2013, but there are now many more bitcoins in circulation: 12.5 are added to the system every 10 minutes. Its total worth is at a record high of more than $16bn, putting its value at around the same as that of an average FTSE 100 company.
During its last surge in 2013, bitcoin boomed as users and speculators rushed to invest in a currency that was supposedly about to become a platform for a disruptive new financial services industry. Its value increased tenfold in two months in late 2013, but after a hack on the Tokyo-based Mt Gox bitcoin exchange it plunged to less than $400 in the following weeks.
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