During the early hours of May 10, the price of Bitcoin — the most popular cryptocurrency, as of now — crossed $1,750, the highest it has ever been. But in the last few weeks, Bitcoin seems to have formed a habit of breaking price records, having gained almost 90 percent in six weeks.
The cryptocurrency was trading at almost $925 on March 24, and according to the price tracker on industry website Bitcoin Magazine, it was trading at over $1,772 at 4:24 a.m. EDT Wednesday. So if you had invested in it the last week of March, you would be close to doubling your money. Even from Friday past, Bitcoin has gained over 13 percent in value.
Part of the reason fueling this astonishing rise could be due to the presence of other digital currencies being offered by start-ups. Start-ups who want to raise money without taking the usual funding routes are introducing “initial coin offerings,” or ICOs, in which they sell their digital currency tokens to people willing to invest in the businesses, bypassing any regulatory oversight, according to a Reuters report. And since Bitcoin is often used to buy other cryptocurrencies, it raises the demand for Bitcoin.
“For the first time in financial history, founders can access capital from both large and small investors armed with nothing more than a slick website,” Arthur Hayes, chief executive at cryptocurrency derivatives trading platform BitMEX, told Reuters.
Other factors likely contributing to Bitcoin’s gains include the legal recognition given to the cryptocurrency in Japan, effective April 1. There is also the matter of reduced incentives to Bitcoin “miners” — the reward given in Bitcoin, to people who using a substantial amount of computing power to validate Bitcoin transactions — that reduced the overall supply of new tokens.
However, its success could lead to its failure. Validating transactions could soon become a problem for Bitcoin, and if not…