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Bitcoin surges above $5K; IMF: Don't be Luddites about virtual currencies

Bitcoin

Oct, 12 2017, 12:41 PM

Believe it or not, a single bitcoin is now worth over $5,000.

The alternative currency spiked more than 6% on Thursday, surging above the $5,000 barrier. It traded as high as $5,168, according to price tracking website CoinDesk.

the news comes after a recent conference at which the head of the IMF warned bankers not to be Luddites when it comes to virtual currencies. [Details below]

The virtual currency has been on a very real tear, gaining 70% over just the past month. A year ago it was trading at less than $650.

While the currency's moves are often inscrutable, analysts have floated a few theories to explain its meteoric rise.

The first is speculation that trading of the currency could soon resume in China following a crackdown on domestic exchanges.

A second theory is that investor confidence was boosted when Bitcoin successfully split into two earlier this year, resulting in the creation of a cheaper offshoot called Bitcoin Cash.

Bitcoin buyers may also have taken heart from reports that Goldman Sachs was looking at how it might trade the currency. Goldman CEO Lloyd Blankfein, however, says that no final decision has been made.

Not every big bank is as keen. In September, JPMorgan Chase CEO Jamie Dimon described Bitcoin as a "fraud" and said he would fire anyone at the bank that traded it "in a second."


IMF: Don't be Luddites when it comes to virtual currencies

Christine Lagarde, the head of the International Monetary Fund, has a message for the world's central bankers: Don't be Luddites.

Addressing a conference recently in London, Lagarde said virtual currencies, which are created and exchanged without the involvement of banks or government, could in time be embraced by countries with unstable currencies or weak domestic institutions.

"In many ways, virtual currencies might just give existing currencies and monetary policy a run for their money," she said. "The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve."

The most high-profile of these digital currencies is bitcoin, which like others can be converted to cash when deposited into accounts at prices set in online trading. Its price has been volatile, soaring over recent years but falling sharply earlier this month on reports that China will order all bitcoin exchanges to close and one of the world's most high-profile investment bankers said bitcoin was a fraud.

For now, Lagarde said, digital currencies are unlikely to replace traditional ones, as they are "too volatile, too risky, too energy intensive and because the underlying technologies are not yet scalable."

High-profile hacks have also not helped, she noted. One notable failure was that of the Mt. Gox exchange in Japan in February 2014, in which about 850,000 bitcoins were lost, possibly to hackers. Following that, Japan enacted new laws to regulate bitcoins and other cryptocurrencies.

But in time, she argued, technological innovations could address some of the issues that have kept a lid on the appeal of digital currencies.

Source: The Associated Press






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