Latest surge pushes bitcoin price above $750 barrier

 
Francesca Washtell
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Bitcoin reached highs of $750 on Wednesday (Source: Getty)

In another bitcoin price rally the cryptocurrency smashed through the $750 (£530) mark during trading today to reach a 2016 high, after falling below $700 on Tuesday.

By mid-afternoon (GMT), bitcoin was still trading up 5.8 per cent at more than $736, after hitting a peak of $750.37 at around 11.30am, according to the Bitstamp index. It was the first time bitcoin has edged above $750 since early 2014.

Less than a week ago bitcoin was trading below $600, before spiking to $650 on Sunday. It has spiked more than 20 per cent in two weeks.

The most recent rally has been attributed to an explosion of demand in China, particularly due to worries of a depreciating yuan and warnings on the country's corporate debt levels, as well as a reduction in the amount of bitcoins produced by mining, known as the "halvening" or halving.

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"This is just a continuation of all factors from general macro economic worries led by China and the block reward halving where the rate of supply of bitcoin reduces by 50 per cent. A perfect storm for bitcoin," Charles Hayter, founder of CryptoCompare, said.

"The block reward halving is a predetermined decrease in the supply of bitcoin that occurs roughly every four years. This has a fundamental effect on the inner workings of the bitcoin ecosystem where miners' profitability can be dramatically affected by price changes, network hashing changes and the reduction in the block reward."

However, analysts have also warned that the currency is still volatile and that the underlying technology that underpins bitcoin, blockchain, holds more growth potential than bitcoin itself.

Andrew Wingfield, FIG Head at King & Wood Mallesons said: "While there will no doubt be speculation as to what is driving the price of bitcoin such as the rising volatility, falling bond yields and the looming possibility of a 'Brexit' and so on, people need to appreciate that bitcoin is a volatile currency.

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"A couple of hundred people in a chat room could move the price of bitcoin. Bitcoin cannot yet be used in a globally meaningful way.

"It is blockchain, the underlying technology behind bitcoin, that has the real growth potential i.e. the highway (blockchain) is more important than the traffic (bitcoin)," Wingfield added.

"Subject to agreeing a consensus on identity management, blockchain can be a highly disruptive real time auditing platform. The application of blockchain could be like moving from posting a letter to sending an e-mail."

Blockchain works as a decentralised, secure public ledger of transactions shared by a network of users.

In a study released earlier this week, the Smith & Williamson Enterprise Index found more than six in 10 business leaders did not believe bitcoin will become a "widely accepted method of payment" in future.

However, it is projected to become the sixth largest global reserve currency by 2030 and was the world's best-performing currency in 2015.

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