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January 6, 2017

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Bitcoin price hits new record high as demand rises

Source: Agencies | January 6, 2017, Friday | Print Edition

THE price of Bitcoin hit a new record high of about 8,800 yuan (US$1,275) yesterday since the digital currency’s debut in 2009, as the world grapples with growing economic uncertainty.

Bitcoin, whose price tripled in 2016, surged 15 percent in the first four trading days of the new year amid global economic uncertainty and a weakening yuan.

It has fluctuated wildly since it was created in 2009 and lost three quarters of its value when it plummeted from its previous Bitcoin Price Index high of US$1,165.89 in 2013.

And news of a major bitcoin theft by hackers in August sent its price plunging by more than 20 percent.

Bitcoin hit an intraday high of 8,895 yuan yesterday, more than tripled the 2,500 yuan a year ago, according to Huobi, China’s top Bitcoin trading platform.

The price took a steep fall in the afternoon to 6,200 yuan before rebounding above the 8,000 yuan mark an hour later.

A strengthening US dollar and tighter currency and capital controls as well as the emergence of the digital economy globally have spurred the rapid growth in Bitcoin trade volume and price, according to market experts.

Exacerbating the rocketing demand is a tightening supply of fresh bitcoins.

The currency was always meant to be finite, and more than three quarters of the planned 21 million Bitcoins have already been “mined.”

Encrypted digital coins are created by supercomputers and then traded online or exchanged for goods and services.

Vinny Lingham, a Bitcoin expert and CEO of US digital identity protection startup Civic, said the dwindling supply of new Bitcoins, and regular currencies sliding against the US dollar as the Federal Reserve ratchets up interest rates, were pushing up the unit’s value.

“There are fewer Bitcoins coming out and people are seeing bitcoin as a good hedge against currency devaluation in their countries, and instead of buying the US dollar, people are buying Bitcoins,” he said.

Lingham highlighted the impact of wider geopolitical uncertainty, such as US President-elect Donald Trump’s potential threat to emerging markets.

“Bitcoin is reacting as a safe haven,” he said.

“Millennials do not believe in gold as their parents did. Bitcoin is becoming the go-to asset if you live in a foreign market and are concerned about your government.”

Bitcoin now has a total market capitalization of over US$18 billion, although a fraction of the value of other globally traded currencies.

Ajay Sunder, vice president of digital transformation for Asia Pacific at consultants Frost & Sullivan in Singapore, said the rise in digital payments would strengthen the currency.

“Generally people are much more comfortable now using digital payment, digital transactions,” he said.

“But Bitcoins are still very marginal. It’s still to be seen if it will go mainstream.”

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