Bitcoin is approaching its highest price ever – passing $ 19,000 (£ 14,241) for the first time since its calamitous collapse in 2018.
In recent months, Bitcoin has been boosted by strong levels of demand from institutional investors, with PayPal announcing that it would allow its users to buy and sell the cryptocurrency.
Other cryptocurrencies have also grown over the past year, such as Ether and XRP.
Some hedge fund managers have suggested that Bitcoin could hit $ 100,000 (£ 75,000) in 2021. Brian Estes, chief investment manager at Off the Chain Capital, said: “I’ve seen bitcoin rise 10X, 20X, 30X in a year. going up 5X is a big deal. “
Others have warned that such predictions are rural. Kevin Muir, a Canadian-based trader, said: “Any hedge fund model on Bitcoin is rubbish. You can’t model mania. Is it credible? Sure. It’s mania. But does anyone really have a clue ? surely. “
Bank of England Governor Andrew Bailey recently said he was “very nervous” about people using Bitcoin to make payments – and has previously warned that people who invest in the cryptocurrency should be ready to “lose all their money”.
The highly volatile digital asset set an all-time high of $ 20,089 (£ 15,062) in December 2017. But in the year that followed, Bitcoin’s value suffered a huge drop – plummeting more than 80% to lows of $ 3,200 (£ 2,400).
At the time, a Sky News investigation found that the collapse led to businesses collapsing, marriages failing, and some investors defaulting on their mortgages.
Bitcoin was billed as peer-to-peer electronic currency system when the cryptocurrency was unveiled to the world in a white paper published in 2008 – not long after the global financial crash.
The document was written by a person or group using the nickname “Satoshi Nakamoto”, but their identity remains unknown.
Bitcoin has a maximum supply of 21 million coins that will be released gradually between now and 2140, fractions of which can be traded.
Some crypto enthusiasts have suggested that this capped supply has contributed to recent price rises as central banks around the world turn to quantitative easing in light of the coronavirus pandemic, which effectively involves printing new money.
The fact that Bitcoin is traded on a peer-to-peer basis at a market-determined value rather than from a central bank has captured the imagination of economic liberals, as well as criminals who seek to evade law enforcement.
The price of Bitcoin has grown more than 360% since March, when the cryptocurrency’s value crashed suddenly.