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Bitcoin surges past $2K mark in latest price spike for digital currency

The value of bitcoin, the decentralized digital currency with global name recognition, has surged past $2,000 US.

Cryptocurrency known for volatile price swings grows in value

Although bitcoin is a peer-to-peer virtual currency that is not issued by a central bank, some companies offer physical bitcoin tokens. (Chris Ratcliffe/Bloomberg)

Bitcoin, the decentralized digital currency with global name recognition, has jumped in value once again.

The value of the cryptocurrency surged past $2,000 US on May 20, according to data from institutional digital currency exchange GDAX. A single virtual "coin" cost $2,355 US (about $3,182 Cdn) on Wednesday morning, GDAX data showed.

The value of bitcoin has surged more than 400 per cent in the past year, according to data from Bloomberg.

The currency has been subject to wild fluctuations in the past. Between Oct. 2 and Nov. 29, 2013, the price of bitcoin rocketed from $116.89 to $1,108.80, according to data from GDAX's retail trading counterpart Coinbase. The digital currency went on to shed much of that value over the following year.

Bitcoin remains volatile, falling below $2,000 on GDAX Monday night before rising above that mark once again.

A GDAX executive said professional financial players have started trading bitcoin directly. The increase in bitcoin prices over the past six months has "really correlated very tightly with a lot of new inbound institutional interest," said Adam White, vice-president of GDAX.

Bitcoin and other digital currencies "aren't going away," said White. "They're going to be a core part of the financial system, most likely."

'A classic mania'

One currency market watcher is more guarded about bitcoin's place in the financial world.

"What's happened is, you have this virtuous cycle of a rising price [which] legitimizes the currency, and then it attracts more interest into the currency," said Adam Button, a currency analyst with ForexLive.com.

"Bitcoin is a classic mania," Button said. "There is no fundamental underpinning for it, other than it's a compelling technological story. But the only people using bitcoin are nerds and criminals, and far more the second category than the first category."

As the price of bitcoin rises, Button said, owners are more likely to hoard the currency, reducing supply and driving up prices even more. Furthermore, he said, some market participants are piling into the currency in anticipation of a future bitcoin exchange-traded fund that could be traded openly on financial markets.

"The thinking in the financial community is that it's about to become much easier to buy and sell bitcoin the same way you would buy or sell a stock," Button said. "A large portion of the latest run-up is market participants trying to front-run that."

'Not just a fad,' says payment processor

The spike in bitcoin prices hasn't dissuaded people from using the currency to make transactions, according to James Walpole, marketing and communications manager with U.S.-based bitcoin payment processor BitPay.

"We are seeing bitcoin being used more and more as an actual payment technology, and that utility is certainly going to contribute to the overall perceived value of bitcoin as a technology, and its overall stability," he said.

Walpole said his company has seen increasing use of bitcoin as a payment method, particularly by companies based in or operating in Asian countries.

Bitcoin ATMs have popped up in cities around the world. (Steven Senne/Associated Press)

"Seeing bitcoin continue to be adopted, even during times when the bitcoin price is going down, as we've seen at BitPay, is a really good sign that this is not just a fad, it's not just a speculative asset," said Walpole. "It actually has something real going on behind it."

Between Nov. 16, just before the latest run-up in bitcoin prices began, and March 17, BitPay has seen transaction volume grow by 80 per cent, according to Walpole.

Benefits for criminals

The open-source software that powers bitcoin was released at the start of 2009. Since then, the cryptocurrency has garnered attention worldwide as a low-cost, digital-friendly way to store money and make payments. For some bitcoin users, the lack of a controlling central bank is a selling point.

Bitcoin has also made headlines for its popularity among criminals.

In the past few weeks, a series of ransomware attacks believed to have been based on a leaked NSA cyberweapon crippled computer systems across Europe and throughout the world. The hackers behind the attack encrypted data and held it hostage, demanding bitcoin ransoms in exchange.

The cryptocurrency also gained notoriety after major bitcoin exchange Mt. Gox went under in 2014. Hundreds of millions of dollars' worth of the cryptocurrency went missing.

Other digital currencies have followed bitcoin's rise, with big names including Ripple, Ethereum, Litecoin and Dash. A recent analysis by TechCruch found that bitcoin accounts for 47 per cent of cryptocurrencies by market capitalization.