Explaining bitcoin’s dazzling rise has always been a fool’s game. Scarcity , gambling gone mad, utility,hedge, global market acceptance, voodoo. All these possibilities and more have been cited for the cryptocurrency’s ability to mint thousands of new millionaires each week.
In December, one bitcoin was worth US$42,000. The peak price represents a gain of 75 per cent in only three months, though it has dropped about 15 per cent in the past few days. Still, bitcoin has been one of the world’s top-performing assets in the past year.
There was a quaint theory that legal currencies were essentially a political construct, with gold-backed currencies long gone. Money is generally not considered money unless it is a means of exchange, a store of value, a unit of accounting – and governments accept it for tax payments so they in turn can pay their suppliers and employees. You cannot pay your taxes with bitcoin or any of its rivals.
Still, bitcoin and other big digital currencies have soared to dizzying heights in recent months. Their climb cannot be explained solely by investors’ probably misguided belief that crypto will soon make the traditional financial system redundant or the recent regulatory approval in the United States of bitcoin exchange-traded funds. Fear and loathing in China seem to be propelling the rally.