Bitcoin breaks $1,000 barrier for first time

The alternative currency has risen by more than 7,600% this year, and some analysts say it's in bubble territory.

By MSN Money Partner Nov 27, 2013 12:28PM
Credit: © luismmolina/E+/Getty Images
Caption: BitcoinsBy John Phillips, CNBC.com

Bitcoin continued its stellar rally on Wednesday, breaking above $1,000 for the first time and marking a rise of over 7,600 percent so far this year.


Many analysts and investors have labeled bitcoin's unfettered rise a bubble, yet greater awareness of digital currencies and relief following last week's U.S. senate hearing have paved the way for fresh gains.


Bitcoin traded as high as $1,030 on the Mt. Gox exchange, up 7,661 percent year-to-date from its Dec. 31 close of $13.27.


Digital currencies cleared a major hurdle when U.S. authorities signaled a willingness to accept them as legitimate payment alternatives at a Nov. 18 U.S. Senate hearing on virtual currencies. The outcome allayed concerns that the government would take steps that could undercut mainstream adoption.


"What we're seeing is governments publicly announce and show that they recognize Bitcoin as a factor in the financial system and that they are considering how to regulate it -- which is good for the currency," Zennon Kapron, managing director of KapronAsiam, told CNBC.


Comments from Federal Reserve Chairman Ben Bernanke were also seen as supportive. In an open letter to Senators before the Senate hearing Bernanke echoed comments from former Fed Vice Chairman Alan Blinder who spoke about digital currencies at a House of Representatives hearing in 1995.


"Vice Chairman Alan Blinder's testimony at that time made the key point that while these types of innovations may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system," Bernanke wrote.


With much of the recent surge in Bitcoin demand coming from China, the U.S. senate hearing outcome has raised expectations that Beijing may steer away from heavily regulating digital currencies.


"If either government were going to ban the currency outright, they would have made the decision now rather than later as it would really serve no purpose to delay beyond fueling speculation. So overly heavy-handed government regulation looks unlikely," Zennon added.


The digital currency has risen around 30 percent since its open on Tuesday, Nov. 19, one day after the U.S. Senate hearing.


Greater awareness

Increased awareness also underlies bitcoin's continued rise following a surge in mainstream media coverage and the preponderance of bitcoin-related events globally.


Web-based searches for the term 'bitcoin,' which was added to Oxford Dictionaries Online this year, have seen a sharp increase since September according to Google data. On the day of the U.S. Senate hearing on virtual currencies, 'bitcoin' was the most popular search term, Google Trends showed.


India will hold its first official Bitcoin conference in mid-December. According to a report in the Economic Times, the event is expected to see participation from the Reserve Bank of India -- India's central bank -- as well as State Bank of India, the the country's largest bank.


Billionaire entrepreneur Richard Branson said last Friday that his commercial space flight venture will accept bitcoin as payment.


A test of whether the digital currency is being accepted more broadly could come with the second annual 'Bitcoin Black Friday' this week. The event will be held one day after the U.S. Thanksgiving holiday. According to the official promotional website for the event, merchants selling everything from web hosting to organic beer will offer special deals to anyone paying in Bitcoin.


More from CNBC

38Comments
Nov 27, 2013 2:36PM
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The U.S. dollar also has no real value. 
Nov 27, 2013 1:08PM
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No. It's not only a bubble but as it peeks out into mainstream, expect it lose everything on the spot. Why? Because ANYTHING that can and is manipulated by phony people for phony purposes will be destroyed. We are heading BACK to last known validated markers so we can move FORWARD with confidence. The Stupid Loop we keep enduring has been fully played out.  
Nov 27, 2013 1:16PM
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Yes please sign me up for the preferred currency of drug dealers and thieves.  As long as everyone is willing to look each other in the eye and say it has value then it does, of course it is backed by nothing and no one see's one another is it's entirely on-line and in my opinion make believe.
Nov 28, 2013 1:42AM
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i thought these things were dumb, but then SWIM (someone who isn't me) used them to make purchase on the silk road on the deep web and he had primo mescaline delivered to his door by fedex.. bitcoins are awesome.


check out the silk road if you don't believe me, bit coins make it possible to buy super cool and legit drugs from all over the world via your computer. score 1 technology

Nov 27, 2013 3:55PM
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How's that for making something out of nothing?!!


I can visualize a room full of people at one of those world financial conferences trying to iron out the bugs of creating a new monetary system that they either enter for free or almost free and then get people to believe it's worth over $1000 per unit.....Yeah....I'll take hundred million of them for $50.00!! SOLD....I'll take a hundred million for $50.00....SOLD! And on and on and on....


After 10 or 15 years they actually flim flam enough people into believing that the  bit coins do really hold some value. And then someone sells a few for over thousand dollars each (maybe even sells to themselves) and the Barnum and Bailey show begins!

Nov 29, 2013 1:09AM
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Bitcoin has been called a bubble time and time again only to keep rising to new heights. True "bubbles" do not do that. Bitcoin is following a new technology adoption curve. At the rate that it is growing we will see it reach $10,000, $50,000 and even $100,000 in the next couple of years.  Sure, it is not fully mainstream yet, we are still in the early adoption phase. But the true power behind Bitcoin is that it is a safe, free and fast way to transmit money peer to peer internationally.  A large company could spend several thousand to send money to someone on the other side of the world using a bank, not to mention the amount of time to do so, but with bitcoin there are no bank fees, or currency exchange fees and the payment can arrive in seconds and it is virtually free to send.  Bitcoin is super secure.  It is the sites that hold the coins that have been hacked.  The wallets are very encrypted.  The whole system is genius and revolutionary.  Read up on it on Wikipedia to understand it more fully.
Nov 30, 2013 1:32AM
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More Bitcoin PONZI news.....why is the media outlets pushing this PHONY SCAM? Seriously this bitcoin scheme is just another scam just like e-stocks were back in 2000.
Dec 2, 2013 9:10AM
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Good to know that the greedy, soulless pieces of human trash did not learn a thing from our most recent economic flirt with doom.  One day the rich who run this country (don't be stupid and actually think its politicians)  are going to take it too far, and we, the good people of the United States (no republicans, you put us in this mess, you Nazis) are going to have to stand up for our freedom, with violence if necessary.
Dec 2, 2013 8:41AM
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Even if you think it has no real value it's still $1000 a coin and can use them to actually buy things.. seems like value lol
Nov 27, 2013 12:45PM
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I own BTC and loving it !

This is definitely the currency of the future and its full potential is only starting to be realized.

People who scoff at buying it at a grand a coin will be regretting it when it reaches 10k a coin in a year or two...

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