Bitcoin price falls back after surge

A representation of virtual currency Bitcoin is seen in this illustration taken Nov 19, 2020. [Photo/Agencies]

The price of bitcoin currency pulled back in trading markets on Monday, sinking 14 percent to about $27,800, after making dramatic gains over the new year break when it surged above $34,000 for the first time.

The most popular cryptocurrency has soared more than 300 percent in the past 12 months, and has seen 75 percent growth in the past month alone.

The price of many other digital currencies has also risen sharply in the last year, with ethereum, the second-biggest cryptocurrency, gaining 465 percent.

Cryptocurrencies are digital coins that exist as strings of computer code that are traded and recorded using blockchain technology.

Bitcoin’s rising price has been attributed to greater interest from large investors and funds betting on it becoming a mainstream payment method.

Its last surge was in 2017, when speculative investment pushed the digital coin’s price to just under $20,000 apiece. But it soon fell back to below $3,300.

The Times reported that the latest surge could also be due to fears of inflation after central banks introduced stimulus packages to protect economies amid the COVID-19 pandemic.

Marcus Swanepoel, chief executive of Luno, a London-based cryptocurrency platform, suggested bitcoin could pass $100,000 this year.

Quoted in the Financial Times, Swanepoel said: “Even the most bullish of bitcoin advocates could not have foreseen such a meteoric rise in price in such a short space of time.”

He added: “But the pattern we’ve seen in the build-up to this milestone-a consistent increase, rather than one sharp spike-sets bitcoin up extremely well for this year.”

The Financial Times reported that there are signs cryptocurrency is becoming more integrated into the financial system.

It noted that the cryptocurrency trading exchange Coin-base last month filed its intent to go public by listing on Wall Street, and that in October, PayPal announced its US customers would be permitted to hold bitcoin in their digital wallets.

However, in October, the Bank of England governor, Andrew Bailey, questioned bitcoin’s value and warned against using it as a payment method.

“I have to be honest, it is hard to see that bitcoin has what we tend to call intrinsic value,” he said. “It may have extrinsic value in the sense that people want it.” Bailey added that he was “very nervous” about people using bitcoin for payments, pointing out that investors should realize its price is extremely volatile.

The United Kingdom’s Financial Conduct Authority said crypto derivatives, or financial products based on the price of bitcoin and other cryptocurrencies, would be banned from sale to retail consumers starting from this month.

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