SAN FRANCISCO • The virtual currency bitcoin has been swept up in yet another speculative frenzy, pushing its price towards the peak it last reached in late 2013.
The price of bitcoin has been buoyed by increased interest from places like Venezuela, where the local currency has lost much of its value, and India, where the government recently removed the largest cash notes from circulation.
More broadly, a tilt towards isolationism that has emerged in American and European politics has given a new sheen to a currency that can move between countries with little oversight.
"The more there is an expectation for new barriers to be erected, the more there is an expectation that bitcoin will be valuable for moving money across borders," said research director Gil Luria at Wedbush Securities.
Rich Chinese have used bitcoin to evade their government's strict controls on moving money in and out of the country, according to bitcoin specialists in China. But the heavy trading on Chinese bitcoin exchanges, much of it by automated software, suggests that most of the price movement is a result of bets by speculators.
In recent days, the price of a bitcoin has been about 3 per cent higher on these exchanges than on US dollar-denominated exchanges, suggesting more demand in China than outside. The importance of speculators suggests bitcoin's value is still driven by the hope of how it might be used someday, rather than real-world use today, which has been hard to quantify.
In US dollar terms, a bitcoin was going for about US$1,025 (S$1,482) on Tuesday, or about 140 per cent more than what it cost at the beginning of last year. The volatile price has led analysts to conclude that it is less similar to a currency than to a commodity, like gold, which has a value resulting from its scarcity.
The recent rise has brought the price of 1 bitcoin to within striking distance of the price of an ounce of gold, which was about US$1,150 on Monday.