Bitcoin hits 10,000 dollars for first time amid concern over pricing bubble
The cryptocurrency reached the 5,000 dollars mark just a month earlier, in October.
Bitcoin pushed past the 10,000 US dollars mark for the first time on Tuesday, further stoking fears of a price bubble around the cryptocurrency.
The price of Bitcoin was hovering around 10,035 dollars (£7,541 ) on cryptocurrency exchange CEX in morning trading, having reached 5,000 dollars just a month earlier.
It has raised concerns that investors are over-estimating Bitcoin’s value.
Neil Wilson, a senior market analyst at ETX Capital, said institutional investors “won’t go near it”.
“Prices are in bubble for sure – people are buying for speculative (reasons) only and that is when you have to worry it’s a proper unsustainable bubble.
“Trouble is guessing whether we are in the boom phase or have moved into the euphoria phase,” he added.
Mr Wilson also noted that the Bitcoin price has not yet reached 10,000 dollars on other exchanges, which he said indicated that this was an “incredibly immature market that is completely decentralised and unregulated, which makes it totally unsuitable for institutional investors”.
Bitcoin has faced notable criticism in recent months, with JP Morgan boss Jamie Dimon taking aim at the cryptocurrency, calling it “a fraud” and saying he would fire employees found to be trading the digital currency for being “stupid”.
“From an investment point of view we are still in the very early stages and the investment community just doesn’t know enough, doesn’t have the depth of data to fairly value Bitcoin,” Mr Wilson added.
“Volatility has been so extreme that the big institutional investors don’t want to take the risk. The massive spread between exchanges is also a problem.”
But the head of the International Monetary Fund (IMF), Christine Lagarde, has conceded that cryptocurrencies like Bitcoin could be a useful tool in the future financial system.
She said virtual currencies could be “easier and safer” to hold than paper bills in remote regions, or countries with unstable national currencies or “weak institutions”.
Ms Lagarde also urged central bankers to be “open to fresh ideas and new demands, as economies evolve”.
A number of countries have taken a more cautious approach, however, with China recently banning the use of Initial Coin Offerings (ICOs) – a digital fundraising tool which sees investors exchange cryptocurrency for “tokens” representing a holding or voucher for a firm.
South Korea has since followed suit.
Mr Wilson said: “While speculative buyers think it will keep on rising, Bitcoin has yet to show itself as capable of behaving like a proper asset for investment purposes.”