Tags: Bitcoin | fees | currency | money

Bitcoin Tops $1,000 as Virtual Money Gains Wider Acceptance

Wednesday, 27 Nov 2013 12:12 PM

 

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The price of Bitcoin surpassed $1,000 on the Mt. Gox online exchange, fueled by speculators snapping up the virtual currency as it gains wider acceptance.

Bitcoins, which exist as software and aren’t regulated by any country or banking authority, surged to a record $1,044 today, up more than 80-fold from a year earlier. The currency has rallied on growing interest from investors in China and the U.S., while merchants are starting to accept Bitcoins for everything from Gummi bears to tuition fees.

The closing in October of the Silk Road Hidden Website, where people could obtain guns, drugs and other illicit goods using Bitcoins, added fuel to the rally as speculators bet the virtual money will gain more mainstream acceptance. The currency gained further credibility this month when the U.S. Senate held hearings where law enforcement and securities agencies testified that while Bitcoins could be used for fraud, just like any financial instrument, the digital money could also be a legitimate means of exchange.

“Milestones do tend to provide some validation, even though they are entirely arbitrary,” Nicholas Colas, chief market strategist at ConvergEx Group, wrote in an e-mail. “$1,000 for a Bitcoin would draw attention and certainly gives people positive on the currency another reason to laugh at the naysayers.”

Bitcoins were trading at $1,024 apiece today on Mt. Gox, one of the exchanges where the digital money can be exchanged for other currencies. On Bitstamp, the most active dollar-based marketplace among online exchanges, they were at $954.76. Bitcoins were trading at $12 to $13 a year earlier, and have quintupled this month.

Bitcoin Origins

Introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto, Bitcoins exist as software, which contain the rules governing their supply. New Bitcoins can only be created by solving complex problems embedded in the currency, keeping total growth limited. There are more than 12 million Bitcoins in circulation, according to Bitcoincharts, a website that tracks activity across various exchanges.

Bitcoins can be traded without being tracked, and can potentially reduce banking-transaction fees, making it an attractive tender for those seeking to buy and sell via the Web or in stores.

© Copyright 2014 Bloomberg News. All rights reserved.

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