The value of a single Bitcoin has soared to over $11,750 (£8,750) for the first time, despite continued fears that boom could be a bubble.
Bitcoin traded at $11,799.99 on the on the Luxembourg-based Bitstamp exchange at around 21:00 GMT on Sunday, before dropping back down a few points.
The surge in price over the last 12 months appears to have been driven by a combination of investors starting to understand the value of the blockchain technology that underpins Bitcoin, technology enthusiasts fears of missing out on the latest trend, and prospectors speculating on an ever-rising price.
Bitcoin remains a volatile currency, prone to rapid rises and falls, but after two years of explosive growth it has started to gain serious interest from a number of leading financial firms. This interest has been interpreted by some to be a signal that institutional capital will soon start to flow into Bitcoin, a belief that in turn has driven the price higher.
Whilst Bitcoin’s meteoric rise may garner the majority of headlines, an arguably more interesting story regards the spread of blockchain technology. It has moved from the underpinnings of cryptocurrencies to become a transactional platform for everything from city governments to land registration to crowdsales – all within the last decade.
Traditionally, companies have turned to IPOs to raise significant funds to invest in future growth, but such stock issuances are very strictly regulated. In contrast, initial coin offerings (ICOs) are mostly outside the scope of such regulations and offer companies a valuable if sometimes controversial new way to raise capital.
The first token crowdsale was held by Mastercoin in July 2013 and raised around $500,000 from 500 investors, but the practice has become increasingly common throughout the last twelve months, with around 50 ICOs now launched each month. And the value of the ICOs have risen dramatically too, with data storage application Filecoin raising a staggering $257m by the time it closed its ICO in September.
Companies are also utilising ICOs to raise funds for concepts which simply don’t fit within the mainstream of today’s financial world. For example, CannaSOS launched in 2014 with a mission to bring the security and decentralised benefits of cryptocurrency to the rapidly-growing cannabis industry. The industry is in desperate need of a secure financial model since the US banking system remains unavailable to cannabis-related businesses despite it becoming legal across a number of states.
The value of ICOs to companies looking to raise capital is clear, but the lack of regulation means that their growth in popularity has coincided with a growth in ICO-related scams. This has caused a number of investors to call for a cooling off period to give regulators a chance to catch up, and China to impose a ban on fundraising through ICO’s on Chinese exchanges.
The first distributed blockchain was only conceptualised by Satoshi Nakamoto back in 2008, so we are still in the “wild west” days of the technology and are likely to see many ups and downs, and bans and approvals before the technology finally hits the mainstream.
Photograph by Typography Images