Bitcoin’s runaway rise underpinned by the move of mainstream financial players such as BNY Mellon, PayPal, Visa and BlackRock into the sector once again brings systemic risk to the financial system.

At a record high of $US52,577on Thursday, the cryptocurrency has a market value around $US967 billion ($1.2 trillion), according to Coinspot, which says there are now 18.6 million coins in circulation out of the finite 21 million to be mined.

The lessons of the GFC to go hard and early have been learned. But now it’s the virtual zero interest rate policy globally and stimulus money that has sent bitcoin and other cryptocurrencies into bubble-like valuations. AP

The coin has more than quadrupled in value in less than a year and a repeat is not out of the question, which would take the value of all funds invested in an asset with zero intrinsic value close to $US4 trillion.

Last week BNY Mellon, which runs one of the world’s largest asset servicing businesses, said it would hold, transfer and issue cryptocurrencies on behalf of clients. Other Wall Street and European banks like JPMorgan and Morgan Stanley are reportedly lining up to follow as the profit motive proves too strong to ignore.

Show me the incentive and I’ll show you the outcome, Berkshire Hathaway’s Charlie Munger once quipped, with memories of the financial system’s near-death experience at the hands of investment banks in 2008 fresh in mind.

Read the full story at afr.com.

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