Bitcoin falls victim to its own success
As investors seek to allocate to cryptocurrency in bigger size, delays in processing blocks, limits on file sizes and increasing electricity consumption expose disagreements among those behind it and lead to high volatility.
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Things are moving fast in the cryptocurrency world.
One week ago, the price of bitcoin hit an all-time high of $7,459. It has been a volatile ride, with plenty of dips along the way, but the 12-month performance has been extraordinary. In mid-November 2016, you could have bought a single bitcoin for $742.
Plenty of financial commentators have cried speculative bubble, none louder than Jamie Dimon, chief executive of JPMorgan, who told the Delivering Alpha conference in September: “If you’re in Venezuela or Ecuador or North Korea, you’re probably better off using bitcoin than their currency. But that can’t possibly happen in the United States, unless you’re speculating. That’s not a reason to say something has value: that other people are going to speculate.”
Dimon confirms: “That’s tulips.”
In mid-November, it looked like investors might finally be taking notice of him. The world’s leading cryptocurrency fell sharply, hitting $5,618 on Sunday, 25% off its high just days earlier, before then lurching back up again to $6,495 on Tuesday.
Various explanations have been offered as to the reasons behind the latest falls.