Bitcoin has zoomed past US$11,000 (NZ15,950) to hit a record high for the sixth day in a row stoking concerns that a rapidly swelling bubble could be set to burst in spectacular fashion.
After soaring more than 1000 percent since the start of the year, bitcoin rose as much as 15 percent on Wednesday.
It topped US$10,000 for the first time in early Asia trading, before surging above US$11,000 less than 12 hours later to reach US$11,395 on Luxembourg-based Bitstamp, one of the largest and most liquid cryptocurrency exchanges, and then dipping back below US$11,000.
Bitcoin's rapid ascent has led to countless warnings that it has reached bubble territory in recent weeks. But the warnings have had little effect, with dozens of new crypto-hedge funds entering the market and retail investors piling in.
The world's largest bitcoin wallet provider, San Francisco-based Coinbase, signed up 300,000 new users between last Wednesday and Sunday, during the US Thanksgiving holiday, according to data compiled by Altana cryptocurrency fund manager Alistair Milne. It now counts more than 13 million customers.
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The evidence suggests that few of the users are buying bitcoin to use it as a means of exchange, but are speculating to increase their capital.
"What's happening right now has nothing to do with bitcoin's functionality as a currency - this is pure mania that's taken hold," said Garrick Hileman, a research fellow at the University of Cambridge's Judge Business School.
"This is very much a bubble that will very much correct itself at some point and people need to be very careful."
Hileman, who last week gave a lecture to the Bank of England on the risks of bitcoin and other cryptocurrencies, also flagged the risk of the whole market collapsing entirely.
Created in 2008, bitcoin uses encryption and a blockchain database that enables the fast and anonymous transfer of funds outside of a conventional centralised payment system.
Reuters
