The price of Bitcoins 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 $1,030 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 drugs, guns and other illicit goods using Bitcoins, also generated interest in the currency. The U.S. Senate held hearings on virtual currencies this month. Lawmakers were told by law enforcement and securities agencies 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 Bitcoinwould draw attention and certainly gives people positive on the currency another reason to laugh at the naysayers.”
Bitcoins were trading at $1,015 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, Bitcoins were at $948.33. Bitcoins were trading at $12 to $13 a year earlier, and have quintupled this month.
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.bloomberg