The cost of the world's best known advanced money quickly crossed the $5,000 stamp on a noteworthy file out of the blue on Friday evening ET, before withdrawing around 5% in ensuing hours.
The possibility of Bitcoin breaking the emblematic point of reference of $5,000 would have been unimaginable to the vast majority toward the begin 2017, when the cost topped $1,000 out of the blue. In case you're following along, the advanced money is up 500% this year, and about 2200% since mid-2015, when it was in the doldrums at around $220.
There appears to be no single reason for the recent run-up. Instead, it can likely be explained by the same factors driving this year’s cryptocurrency bull run: Publicity-driven speculation; New financial products creating unprecedented liquidity; Trading surges in Asian markets; Institutional investors treating digital currency as a permanent new asset class.
Meanwhile, the $5,000 milestone is likely to trigger a new round of chatter that Bitcoin and other cryptocurrencies are in a bubble and vulnerable to a major price collapse. Bitcoin has experienced a series of spectacular crashes in the past (most recently in 2014 when it dropped around 75%) but has always recovered.
Finally, it should be noted that Bitcoin crossed $5,000 on an index used by the trade publication Coindesk, but not by other major indexes. This is significant because Coindesk’s BPI index includes prices from several Asian exchanges, where prices are typically higher than US or European one. Here’s a screenshot showing the milestone (the time shown is GMT):
A more conservative price estimate can be found on an index created by the Winkelvoss twins, are among the world’s biggest holders of Bitcoin. Known as the Winkdex, the index only draws data from U.S.-dollar denominated exchanges. As you can see, the index’s calculation shows how Bitcoin prices approached the $5,000 mark, but did not break it:
Bitcoin is not the only cryptocurrency to achieve new highs this week. Ethereum nearly crossed the $400 mark for the first time while another smaller rival, Litecoin, briefly broke through the $90 mark.
As of Saturday late morning ET, Bitcoin was trading between $4,500 and $4,600.