At over $7,000, is bitcoin a bubble?
by FRANK ELEANYA
November 2, 2017 | 3:33 pm| | | Start Conversation
The price of bitcoin has shrugged off fork hangover that created Bitcoin Gold to reach record levels many times this week raising investors concerns about a ‘bubble’.
It climbed to $6,306.58 on the CoinDesk Bitcoin Price Index on Sunday, 29 October; over $6,500 on Wednesday, 1 November; and $7,355.35 on Thursday morning, November 2, 2017.
The cryptocurrency crossed the $6,000 line for the first time on October 21 at $6,183.
The price of bitcoin as at press time was $7,119.18.
According to CoinMarketCap, bitcoin has gone up over 20.56 percent for the last seven days, and its market capitalisation has now peaked at over $116 billion.
Analysts said that the rise comes at a time when bitcoin has never been more visible in the public eye, with government officials, business leaders and investment luminaries now discussing bitcoin on an almost daily basis.
Early this week, the Nigerian House of Representatives asked the Central Bank to release N12 billion accrued into the cryptocurrency account of Cashflowabi Network Limited to enable it pay its customers. The Ministry of Information in Iran announced on Tuesday that “arrangements are being made” to put together the infrastructure for bitcoin use “as early as possible”.
Among business leaders who made their views known on the cryptocurrency were Warrent Buffet, Saudi Prince Al-Waleed bin Talal and Peter Thiel. Reports also showed that legendary investor Bill Miller now has over 30 percent of its assets in bitcoin, up from 5 percent last year.
However, demand for bitcoin went into a frenzy as CME Group, the world’s largest futures platforms announced it was ready to list the digital coin before the end of the year.
A school of analysts told BusinessDay that the price leap could also be a result of new tether cryptocurrency being issued. Tether is a blockchain technology that converts cash into digital currency, to anchor or tether the value to the price of national currencies like the US dollar, the Euro and the Yen.
One thing that the new price of bitcoin has thrown up again is the debate of a bubble. Credit Suisse CEO, Tidjane Thiam disclosed that many banks have little or no appetite to get involved with bitcoin and cryptocurrencies due to fears of a bubble and illicit activity.
Analysts explained however, that to recognise a bubble, people will only buy an asset purely for its speculative value.
In the case of bitcoin which has already appreciated 500 percent in 2017, there have been numerous corrections on the way up and the process of finding its real value is still ongoing.
“A bubble will happen when it starts going up and up for no reason,” said Tim Akinbo founder of Tanjola.com. “Bitcoin is still largely undervalued and could still appreciate higher. The global market capitalisation is a little over $100 billion. It is still small,” he said.
Owenize Odia, Luno’s Country Lead told BusinessDay it is impossible to conclusively predict what the price of bitcoin might end up with in 2017.
“Bitcoin is quite volatile. Prices go up and down, hence we always advise our customers to be careful while investing in bitcoin.
“We are also quite positive about the recent developments in the digital currency space and we will keep working to make it easy for Nigerians to buy, sell and learn more about digital currencies,” she said.
Tuesday, 31 October marked nine years since the Bitcoin White paper was released by SatoshiNakamoto.
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