Many investors have said that the most important factor driving the current enthusiasm is the entry of hedge funds and other institutional investors.
The Chicago Mercantile Exchange and Chicago Board Options Exchange smoothed the way for big investors. been competing to launch Bitcoin futures contracts. Most banks have already registered with these exchanges and, as a result, can immediately begin to negotiate contracts. The exchange of options has said he plans to start trading on Sunday.
It is not yet clear how the arrival of Bitcoin futures will influence the demand for digital tokens.
With a futures contract, banks can bet on the Bitcoin price without holding the underlying Bitcoins. This is expected to bring many new players to the market who do not want to deal with the complications of keeping Bitcoins.
But the futures contract will also allow investors to reduce the Bitcoin, or bet that the price will go down, which has been difficult to do so far. Some analysts believe that this could press down the price. Other market participants have worried that Bitcoin futures may separate Bitcoin risks in the rest of the financial system.
People still use Bitcoin and other virtual currencies to make ransom payments and buy illegal products online, including synthetic opioids. But that activity has been declining since the authorities closed some of the biggest black markets online this year.
What role do small investors play in virtual currency markets?
Individual investors have been as active as large investors.
Nowhere is the phenomenon of ordinary people buying virtual currencies more visible than in South Korea, where several exchanges have shop windows to help new customers. This is all the more remarkable because, just a year ago, Koreans showed almost no interest in these markets.
Small Japanese investors have also been investing in Bitcoin. They have been encouraged by the laws passed this year that essentially legalized Bitcoin and allowed Bitcoin exchanges to obtain regulatory licenses.
In the United States, most small-time investors have turned to the San Francisco Coinbase, which offers a Bitcoin brokerage service, similar to Charles Schwab, as well as an exchange for larger investors. Coinbase now has more account holders than Schwab, and has struggled to keep up with the growth.
China used to be the most active country for Bitcoin trade and mining, but authorities there have been repressed this year.
What are the dangers of entering this market?
Many of the largest exchanges, including in South Korea, are essentially unregulated. The lack of supervision means that no one is verifying that the exchanges adequately secure the money of their clients or that the big players can not manipulate the price. One of the largest exchanges in the world, Bitfinex, has been hacked many times and provides little transparency about where your money is kept.
Even regulated exchanges, such as Coinbase in the United States, have not been proven in battle as large financial institutions, and their operations have been reduced at key moments.
Once people buy Bitcoin or other virtual currencies, they are often attacked by hackers who have become experts in penetrating Bitcoin accounts. The Bitcoin "wallets" are vulnerable to new types of attacks that are not a problem for ordinary financial accounts.
Most importantly, unlike money in a bank account, when a Bitcoin goes away, there is essentially no way to get it back. and there is no insurance to cover your loss.
Are there more people who use Bitcoin to pay for things?
When Bitcoin was launched in 2009, it was described as a new type of electronic cash.
Recently, however, many programmers working on Bitcoin have said that the system in its current form is not a particularly good way to pay for things. They argue that it is better designed to serve as a kind of scarce commodity, such as digital gold, which allows people to keep their money out of the control of governments and businesses.
Many people who want to use virtual currencies for online payments are looking for Bitcoin competitors, such as Bitcoin Cash and Monero.
What role do the other virtual currencies play in this frenzy?
Earlier this year, the bullish sentiment centered on Ethereum, a virtual currency network that is more adaptable than Bitcoin. The price of Ether, the virtual currency in the Ethereum network, has continued to rise in recent months, but not as fast as Bitcoin.
Many investors were also putting their money into personalized virtual coins launched by entrepreneurs in the so-called initial offers of currencies. These new virtual currencies have generally been designed to serve as the internal payment mechanisms in the new software that entrepreneurs are building.
This fall, however, regulators have signaled that they plan to crack down on offers of currencies.
Where did it happen? Virtual currencies come from, and how do they work?
The Bitcoin software was released in early 2009 by a mysterious creator who called himself Satoshi Nakamoto. The search still stands for the true identity of Satoshi.
The software released by Satoshi establishes the basic rules for Bitcoin and the computer network in which it lives. Unlike other forms of money, which are controlled by governments and financial institutions, Bitcoin operates in a decentralized network of computers that no institution controls. For more details, see our Bitcoin explainer.
Continue reading the main story