NEW YORK Nov 18 Bitcoin surged over 27 percent
to a new high of US$675 on Monday ahead of a U.S. government
hearing on possible regulation of the digital currency.
While not an official seal of approval, the hearing is
giving some legitimacy to a payment mechanism that has been
associated with illegal activities even as it gains acceptance
by the general public and investment community.
Witnesses at the Senate Homeland Security Committee hearing
include officials from the Secret Service and Financial Crimes
Enforcement Network and the Justice Department's Criminal
"The government is taking a very thoughtful and balanced
approach to bitcoin and bitcoin regulation," said Barry Silbert,
founder of the Bitcoin Investment Trust, launched in late
September and valued at US$22.8 million on Friday. It holds
around 53,000 Bitcoins.
Bitcoin traded as high as US$675 on Monday on Tokyo-based
exchange Mt. Gox, the best-known operator of a bitcoin digital
marketplace. That was a rise of 27.7 percent from Sunday's
close. It last changed hands at US$672.
The digital currency, which trades 24 hours a day, every
day, has risen around 404 percent in the last two months.
Association with drugs, money laundering, murder for hire
and other illegal activities has not stymied interest in
bitcoin, the digital currency not backed by any government or
central bank and until recently a niche alternative currency
touted by computer geeks and anti-government advocates.
The currency, whose supply is limited, is "mined" by solving
math problems. Bitcoin transactions are tracked by a network of
computers that validate transactions and prevent counterfeit.
In October, the U.S. Federal Bureau of Investigation shut
down Silk Road, an online marketplace used to buy and sell
illegal drugs, and seized $3.6 million in bitcoins.
"Lawmakers are rightfully concerned about the illegal
aspects of bitcoin but the fact that they're giving bitcoin the
time of day helps cement its legitimacy," said Christopher
Vecchio, currency analyst at DailyFX.
But it may also be government interest itself that is
prompting the currency's huge moves of recent weeks, he said.
"If investors feel that bitcoin is truly legitimate but
foresee supply constraints due to exchanges closing or new
regulations hitting the market, there is a sense of urgency
developing to obtain bitcoins now, 'while you can,'" said
Irrespective of the reason for the move, Bitcoin Investment
Trust's Silbert at least is optimistic about the long-term
outlook for the digital currency.
"Everyone is uncomfortable that the price has moved so
quickly," Silbert said. "Bitcoin in its short history has gone
through a series of bubbles and busts. But after every bust a
new price base has formed."
Shares in the Bitcoin Investment Trust had a net asset value
of $42.44 on Friday, up from $12.88 when the fund launched on
September 25. Each share is 0.1 percent of a Bitcoin.