A leading team of economists have suggested that Bitcoin’s time is up and the bubble is finally bursting.
The cryptocurrency faces signals of a ban in South Korea and almost halved over a few weeks, increasing again by 18 percent on Thursday.
Bitcoin has proved to be extremely volatile over the past month, alarming regulators around the world. Capital Economics said in a research note that “that the bubble is bursting” and has a long way to fall.
“Most people are buying Bitcoin, not because of a belief in its future as a global currency, but because they expect it to rise in value,”
“Accordingly, it has all the hallmarks of a classic speculative bubble, which we expect to burst. Triggers for the bubble to burst could be a further crackdown by regulators or a major hacking attempt.
“When it will fully burst is anyone’s guess and prices could yet rise again, before they fall further ahead.”
“Not only could it transform the financial system – by removing the need for banks to act as intermediaries – but it could have applications elsewhere, for example, in maintaining tax and hospital records. A particularly interesting element is smart contracts, which could transform supply chains and trade finance.”
The volatility of the cryptocurrency led to South Korea’s chief of financial services commission warning of a possible ban.
“The government is considering both shutting down all local virtual currency exchanges or just the ones who have been violating the law,” he said. Similar concerns have also been expressed in China and Russia.
Vladimir Putin said on Tuesday that “in broad terms, legislative regulation will be definitely required in future”.
Bitcoin value currently stands at over $11,000 (1125 GMT). This is compared to December highs of $19,500.