Heavy trading on Bitcoin exchanges has pushed the price up to over $1,000 for the first time.
Popular exchange Mt. Gox reported that the psychologically important price point on Wednesday morning US time, driven in part by strong interest in Chinese markets. In the past month the price of the digital currency has risen around $300, fueling concerns from some that we may be witnessing a Bitcoin bubble.
"Bitcoin is in a massive bubble that will in all likelihood eventually pop. Second, even if I'm wrong and Bitcoin does manage to establish itself, it will end up looking a lot more like a traditional currency than the True Believers envision," said Noah Smith, assistant professor of finance at Stony Brook University.
"Indeed, it's possible that Bitcoin will succeed but still settle at a significantly lower price than it's at now, due to the power of fractional reserve banking. But it's hard to imagine a path from here to there."
Not that this will trouble investors such as the Winklevoss brothers, who claimed in April to have invested $11m of their settlement with Mark Zuckerberg, back when the price was bubbling under $200. They have since started an investment vehicle and claim to have one per cent of all the Bitcoins in circulation.
The currency has its supporters in government, too: the Federal Election Commission looks likely to allow Bitcoins to be used for election campaign donations. And last week the Senate Homeland Security and Governmental Affairs committee held an official discussion about the currency.
"Virtual currencies have captured the imagination of some, struck fear among others, and confused the heck out of many of us," said committee chairman Tom Carpe. "Fundamental questions remain about what a virtual currency actually is, how it should be treated, and what the future holds. It's clear that this technology presents some new and unique risks, but with it, there are clearly some who believe it has great potential."
But also great misery. On Wednesday Welsh IT administrator James Howells told The Guardian that he'd managed to throw away a stash of 7,500 Bitcoins he'd been keeping in an old disk drive and said it's now buried under a few feet of domestic waste landfill.
"I'm at the point where it's either laugh about it or cry about it," Howells said. "Why aren't I out there with a shovel now? I think I'm just resigned to never being able to find it." ®
Exceeding $1,000 per Bitcoin is certainly a psychological breakthrough. The next step is hitting one BTC per troy ounce of gold. Right now, one coin of the crypto-currency is worth 0.84 XAU, via Mt. Gox.