Bitcoins currency reaches historic highs amidst controversy

Just one month after skeptics were predicted bitcoin’s demise the virtual currency reached record new highs.

The currency climbed to USD 273.50 on Mt. Gox – a leading bitcoin exchange – marking a 148% rise since the 2nd of October when it traded at USD 110.

The demise was predicted after U.S. law enforcement officials shut down the Silk Road, an online exchange where users were using the currency to pay for illegal goods such as drugs, weapons, and even paid kills.

However, as the value increase shows, the predictions were wrong.

Launch and rise

Bitcoin is the most popular digital-only currency traded, and is most often used to pay for online goods.

According to ConvergEx’s Chief Market Strategist Nicholas Colas, there are two key drivers behind the recent value increase.

The first is increased demand from world superpower China. Many large companies there are now accepting bitcoins for payment.

The second is the strong demand for SecondMarket’s recently launched the Bitcoin Investment Trust – a  private, open-ended trust exclusively invested and valued in bitcoin.

A sound investment?

Colas also pointed out that Michael Novogratz of hedge fund firm Fortress recommended buying bitcoins, after noting their apparent longevity and so-far increasing value.

In addition, several international retailors are considering adopting the currency, including eBay.

And lastly, America’s political campaigns could soon accept virtual money, with the Federal Election Commission recommending the use of bitcoins for contributions.

The recent controversy

The recent surge in value should, however, be noted alongside its recent controversy.

An Australian male who oversaw a bitcoins “wallet service” – allowing users to store their digital currency online – has declared hackers stole over one million Australian dollars’ worth of bitcoins from his site.

According to the Sydney Morning Herald, the two thefts occurred on 26 October, with the man – unnamed for legal reasons – stating 4,100 bitcoins (£650,000) had been stolen.

He said as bitcoin transactions are near impossible to trace he would not report the theft to the police, leading some to speculate whether it was an ‘inside job.’

This story outlines both the strength and weakness of the online currency – whilst it is decentralised with nobody in overall control, its online standing mean police do not have access to any more information than any user does – leaving it partially unprotected.

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