Bitcoin passes $1,250 for first time as enthusiasm grows

This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. The nation's election regulator says that groups can't receive contributions in the form of Bitcoins, at least for now.  The price of the digital currency bitcoin soared above US
This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. The nation's election regulator says that groups can't receive contributions in the form of Bitcoins, at least for now.  The price of the digital currency bitcoin soared above US$1,000 (S$1,250) for the first time on Wednesday, extending a surge this month after a United States (US) Senate hearing on virtual currencies. -- FILE PHOTO : AP 

NEW YORK (REUTERS) - The price of the digital currency bitcoin soared above US$1,000 (S$1,250) for the first time on Wednesday, extending a surge this month after a United States (US) Senate hearing on virtual currencies.

Bitcoin hit a high of US$1,073 on Tokyo-based exchange Mt.

Gox, the best-known operator of a bitcoin digital marketplace, compared with just below US$900 the previous day.

At the beginning of the month, bitcoin, a prominent digital currency that is not backed by a government or central bank, traded at around US$215.

Bitcoin advocates say last week's Senate hearing gave more legitimacy to the currency, which has been gaining acceptance by the general public and investment community but has yet to become an accepted form of payment on the websites of major retailers such as Amazon.com.

"It isn't just the bitcoin community saying that bitcoin is used for good things and there's a lot of great potential, we have members of Congress and government agencies who all agree," said Ms Jinyoung Lee Englund, spokesman for the Bitcoin Foundation in Washington.

Bitcoin is valued by many users for its anonymity. But government officials expressed concerns that many virtual currency services do not have the proper controls in place to prevent illegal activities such as money laundering.

In October, federal authorities shut down an online marketplace called Silk Road that was used for purchasing drugs and hiring hit men. Authorities seized US$3.6 million worth of bitcoin, which was used instead of cash or credit cards to complete transactions on Silk Road.

Others pointed to the volatility in bitcoin prices.

"A narrow asset class and lots of liquidity is the perfect environment for a rapid burst up in value and then corrections," said Mr Sebastien Galy, a currency strategist at Societe Generale in New York.

Bitcoin trades 24 hours a day, every day. The supply of the currency, which is "mined" by solving math problems, is limited.

More than 200 bitcoin businesses and other merchants are participating in a bitcoin Black Friday shopping event, where users can buy everything from airplane tickets, Christmas trees or organic beer.