Enthusiasm for the digital currency Bitcoin has surged this month. Wednesday, November 27th, Bitcoin hit a high of $1,000—incredibly impressive considering it traded at $215 at the beginning of November.
Bitcoin is a popular digital currency that isn’t backed by any one government or central bank. Last week, the U.S. Senate held a hearing on digital currencies, during which government officials expressed a willingness to accept the digital currency as a legitimate payment alternative to traditional currency.
“What we’re seeing is governments publicly announce and show that they recognize Bitcoin as a factor in the financial system and that they are considering how to regulate it – which is good for the currency,” said Zennon Kapron of KapronAsiam.
However, officials have expressed concern that without proper regulations in place, Bitcoin could be effectively used in illegal activities like money laundering and black marketplaces like Silk Road. Last month, over $3.6 million worth of Bitcoin was seized when Silk Road, an online marketplace for hit men and illegal drugs, was shut down.
But regulation of Bitcoin would also take away much of the anonymity that many users value even for legal transactions. “It isn’t just the Bitcoin community saying that Bitcoin is used for good things and there’s a lot of great potential, we have members of Congress and government agencies who all agree,” said Jinyoung Lee Englund of the Bitcoin Foundation.
However, such a surge in value has many market analysts and investors questioning whether Bitcoin is a bubble getting ready to pop. “A narrow asset class and lots of liquidity is the perfect environment for a rapid burst up in value and then corrections,” said currency strategist Sebastian Galy.