Bitcoin tumbled below US$4000 last month after China's central bank banned initial coin offerings and ordered all cryptocurrency exchanges to close. Reports that the Chinese government will ease those regulations is also helping the price.
A rotation out of digital tokens sold in initial coin offerings and into bitcoin is providing an additional boost. Investors are becoming increasingly wary as projects with little substance have mushroomed, and as hacks and technical issues have caused some to lose thousands. There's a Wu-Tang Coin with the sole purpose of buying and releasing the Wu-Tang Clan album bought by fraudster Martin Shkreli, and Paris Hilton and Floyd Mayweather publicised their ICO investments on social media. Bitcoin is seen as a crypto-safe haven next to many of these tokens.
"Everyone seemed to agree that once it broke through US$5000, the sky is the limit. I wouldn't be surprised to see it double from here in a very short space of time," said Ben Kumar, a money manager at Seven Investment in London, who invests in bitcoin in an individual capacity. "There's a long time to run before people get tired of chasing the next big thing."
Bitcoin isn't the only one to benefit as lately it seems that shares of any company with even an indirect link to the cryptocurrency space is bound to rally. Overstock.com soared after announcing a regulated digital tokens exchange, and Goldmoney climbed after saying it will offer its clients the ability to trade and store bitcoin and rival digital currency ether.
In June, Nvidia and Advanced Micro Devices, which make hardware used in cryptocurrency mining, rallied as ether surged to a record. Bioptix's stock nearly doubled in the days leading up to the company's announcement that it's renaming itself Riot Blockchain.
Bitcoin's rally and the proliferation of other digital assets is attracting the wary eyes of regulators globally. China and South Korea banned ICOs, and Russian President Vladimir Putin this week called for regulation of the sector. At least 13 other countries have imposed new rules or announced plans to tighten regulations.
The digital currency's surge has divided the financial community between those convinced it is a bubble on the verge of popping, like billionaire hedge fund manager Ray Dalio said. Other big-name investors like Mark Cuban and Mike Novogratz said they're investing in the sector.
Novogratz, who is starting a US$500 million cryptocurrency fund, said this week he believes the price will double to US$10,000 in less than a year. The road is sure to be rocky, as bitcoin's volatility is still 10 times that of gold.
"It's a very speculative market," Jon Moulton, a UK-based private equity veteran who owns bitcoins, said in an interview with Bloomberg TV's Francine Lacqua. "It's going to be a very volatile asset for a long time."
