The digital currency Bitcoin has seen a great start to the new year, jumping above $1,000 for the first time since 2013 and outperforming all central-bank-issued currencies.
The web-based “cryptocurrency”, which relies on thousands of computers across the world to validate transactions and add new bitcoins to the system, increased 2.5 percent to $1,022 and saw a 125 percent climb over 2016.
The currency, which has been criticised for being used as a vehicle for drug dealers and tax evaders, is used to move money across the globe quickly and anonymously, free of control from any central bank or government and making it easier to get around capital controls.
“We are seeing the aftermath of zero interest rates run amok. So bitcoin is a healthy reminder that we don’t have to hold on to dollars or renminbi, which is subject to capital controls and loss of purchasing power. Rather it’s a new asset class,” said Bobby Lee, chief executive of BTC China.
Bitcoin also appeals to areas where there is worry over-supply of cash, such as India where the Prime Minister recently removed high-denomination banknotes from circulation. “The growing war on cash and capital controls is making bitcoin look like a viable, if
“The growing war on cash, and capital controls, is making bitcoin look like a viable, if high risk, alternative,” said Paul Gordon, co-founder of Quantave.
Overall, experts have predicted a continuing success from the crypto-currency due to the “network effect” created.
“The value of Uber in any city is directly dependent on the number of drivers and number of users, it’s not linear it’s exponential. The same is true of the value of bitcoin,” Lee said.
Bitcoin’s total worth is at a record-high above $16 billion, putting its value at similar to that of the average FTSE 100 company.