The price of the digital currency bitcoin surged past $ 1,700 on Tuesday after a 6% rise driven by new speculative buying in a new kind of capital raising and virtual-currency creation dubbed the “initial coin offering.”
Bitcoin traded hit an intraday record high of $ 1,747 on the index maintained by the research site CoinDesk. That would put it up about 80% year-to-date, after closing 2016 at $ 968. Even for bitcoin, a currency whose short history has been marked by extreme volatility, that’s a big move.
In late February, the currency pierced its old high of $ 1,147 set in 2013, and it’s been mostly rising since then.
Bitcoin, a stateless digital currency running on a decentralized computer network, benefited from perceptions of increased geopolitical uncertainty following the election of Donald Trump as U.S. president. But it’s followed up on early gains this year due in part to enthusiasm for new coins that function like bitcoin but are designed to promote new startup companies.
The startups are creating and selling bitcoin-like tokens that operate as a cryptocurrency- crowdfunding hybrid. Sometimes the new coins are marketed as a pure investment in a new company, while other times they provide access to do business with the new company.
Bitcoin, launched in 2009, allows holders anywhere to exchange value directly without involving a third party like a bank. In its short lifetime, it’s attracted passionate followers, equally passionate skeptics, and a handful of catastrophic hacks that have undermined investor confidence. It’s also spawned imitators seeking to catch the next big technology wave.
[wsj-responsive-more-in tag=”Bitcoin” category=”” ]
The proliferation of dozens of new “alt coins” has sparked a new round of speculative buying across all virtual currencies, including bitcoin. Ethereum, one of the more established alternatives, has risen from $ 8 to $ 87 this year. Ripple’s total market value was $ 231 million at the start of the year. It is currently $ 7 billion.
“There is obviously a lot of hype in the whole space,” said Jed McCaleb, an early bitcoin acolyte who co-founded both Ripple and another platform called Stellar. “When you raise millions in a matter of minutes, there’s probably a lot of hype driving that.”
Bitcoin’s rise Tuesday however came despite declines in many smaller virtual currencies that followed reports of service problems at one of the larger exchanges that deals in the small tokens.
Bitcoin’s rise has also been fueled by hope that it will become a more-modern store of value for investors, a sort of gold 2.0. Bitcoin earlier this year finally started trading above the price of gold, when it crossed above the $ 1,200, and has only grown since then. Gold peaked at $ 1,294 this year, and is currently trading around $ 1,217. Bitcoin first traded above $ 1,200 in March, had one brief drop to below $ 1,000, and has been surging since then.
For more insight into stocks and bonds, deals and dealmakers, the economy and business, be sure to subscribe to the MoneyBeat podcast.