Whether you think Bitcoin is a new path to wealth or the biggest bubble since Beanie Babies, the cryptocurrency was the talk of the financial system on Wednesday as it smashed through $11,000 per coin — up $1,000 in 24 hours and up a blistering 900-plus percent since the start of 2017.
The digital currency revolution and Bitcoin in particular have drawn attention from everyone from the Prime Minister of South Korea to Federal Reserve nominee Jay Powell to academics, central banks, and JPMorgan Chase chairman Jamie Dimon. Even singer Katy Perry got into the act, posting a photo on Instagram of her asking Warren Buffett his thoughts on cryptocurrency.
Chicago-based CME Group, the world’s most diverse derivatives marketplace, is expected to launch a contract for Bitcoin futures next month. The Nasdaq Stock Market will start a Bitcoin futures site on its commodities trading platform in 2018.
Wednesday’s Bitcoin surge had Wall Street talking.
“Bubble or new asset class, either way it’s something that means something,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “Given the appreciation we’ve seen, everyone is talking about it. You have to respond to it, like it or not.”
Bitcoin was created by an unknown person in 2009 under the alias of Satoshi Nakamoto. Bitcoins can be used to buy merchandise anonymously, without a middleman and involving lower or no fees and no banks.
The currency is traded on “Bitcoin exchanges” where people can buy and sell using various currencies. Bitcoins are a product of something called “blockchain technology,” and they are stored in digital wallets that exist in the cloud or on people’s computers.
The currency is unregulated and its future is uncertain. No one owns the Bitcoin network. It is not tied to any government or country.
Jay Blaskey, a digital currency specialist at BitIRA, a retirement option for cryptocurrencies, said Bitcoin represents the next evolution of money.
“It’s a bit of a paradigm shift in currency,” Blaskey said. “In the Bronze Age, we had metal. With the dawn of literacy, we used notes. Today we are living in the technology age, and this is the first real solution built in this environment to suit the needs of this current, technology-connected world.”
Christian Catalini has studied Bitcoin closely as an assistant professor for technological innovation at the MIT Sloan School of Management.
“Bitcoin is maturing, and interest from institutional investors is growing. There is a lot of enthusiasm, but part of it is likely driven by hype,” Catalini said. “One should be worried about that. Guessing the timing (of a crash) will be extremely difficult, but it’s clear that when it moves so quickly over such a short period of time, there may be a separation between the value the network is able to deliver and what people think it’s delivering.”