Bitcoin surges past $10K, then plunges

Associated Press

LONDON

The price of bitcoin surged through $10,000 Wednesday, adding to its ten-fold jump in value this year and fueling a debate as to whether the virtual currency is gaining mainstream acceptance or is merely a bubble waiting to burst.

But as soon as bitcoin went through $10,000, it surged past $11,000, only to plummet from those lofty levels. The cost of buying one bitcoin as measured by the website Coindesk was hovering around $9,800, and was as low as $9,300 Wednesday afternoon. A price of one bitcoin had been roughly $1,000 at the beginning of the year.

The steep rise in the price of bitcoin and other virtual currencies this year has divided the financial community on their merits and whether – or when – the value might come crashing back down.

The CEO of JPMorgan Chase has called bitcoin a “fraud,” as it is not based on anything other than software code and is not backed by any monetary authority.

Other executives, including International Monetary Fund chief Christine Lagarde, say virtual currencies should not be dismissed and could have useful applications, such as a means of payment in countries with unstable currencies.

Some countries, such as China, have tried to stifle bitcoin exchanges. But in a move that gave further credibility to the virtual currency, the U.S. exchange operator CME Group said last month that it plans to open a futures market for the currency before the end of the year, if it can get approval from regulators.

Bitcoin was created about a decade ago as an alternative to government-issued currencies. Transactions allow anonymity, making it popular with people who want to keep their financial activity or identities private.

The digital coins are created by “miners,” who operate computer farms that verify other users’ transactions by solving complex mathematical puzzles.

These miners receive bitcoin in exchange. Bitcoin can be converted to cash when deposited into accounts at prices set in online trading.