There is a surge in the use of Bitcoins or the digital currency recently. It has tipped to become a new safe haven asset as the world grapples with growing economic uncertainty.
The unit broke the USD 1,100 barrier on the Bitcoin Price Index, an average of major exchanges, to continue a dizzying rise that made it the best performing currency of 2016.
Bitcoin is a cryptocurrency and a payment system. Invented by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto.
Bitcoin was introduced on 31 October 2008 to a cryptography mailing list and released as open-source software in 2009.
There have been various claims and speculation concerning the identity of Nakamoto, none of which are confirmed. The system is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain, which uses bitcoin as its unit of account.
Bitcoin is often called the first cryptocurrency, although prior systems existed and it is more correctly described as the first decentralized digital currency. Bitcoin is the largest of its kind in terms of total market value.
And news of a major bitcoin theft by hackers in August sent its price plunging by more than 20 per cent.
But analysts say its volatility will ease as volumes grow and point to a strengthening US dollar and tightening currency and capital controls, as well as the rise of the digital economy, as major factors behind its appreciation.
In particular, the chaotic withdrawal of high value bills in India and restrictions on buying foreign currency in China as the yuan slides against the dollar have stoked demand, analysts say.
Exacerbating the rocketing demand is a tightening supply of fresh bitcoins.
The currency was always meant to be finite, and more than three quarters of the planned 21 million bitcoins have already been ‘mined’.
Bitcoin is becoming the go—to asset if you live in a foreign market and are concerned about your government.
In China, the yuan is at its lowest level in eight years against the dollar and Beijing’s tightening controls on individuals’ foreign currency purchases to curb massive capital flight is cited as driving bitcoin demand.
Indian Prime Minister Narendra Modi’s shock decision to withdraw high—denomination 500 and 1,000 rupee notes from circulation is also thought to have boosted the currency.