Bitcoin’s remarkable ride continued early Thursday as the world’s most valuable digital currency broke through the $5,000 level and reached an all-time high price just over $5,200, according to Coinmarketcap.com. Bitcoin had been flirting with the $5,000 barrier for weeks, and indeed briefly broke through it early in September on some exchanges before falling back.
Bitcoin’s market capitalization stands at $86.2 billion, well ahead of number-two blockchain Ethereum, at $29.2 billion, according to Coinmarketcap.
The milestone is the latest in a year in which Bitcoin has quintupled in value despite a range of setbacks. While the runup has enriched investors, it has also overshadowed Bitcoin’s utility as a payment method. And some observers, including JPMorgan Chase & Co. chief executive Jamie Dimon, have warned the coin’s valuation is a bubble on a par with speculative frenzies of the past in which investors ultimately came to grief.
On top of that, Bitcoin’s price suffered last month in the wake of news that authorities were shutting down exchanges in China, where much of the cryptocurrency is mined and exchanged. As recently as the middle of last month, it traded in the mid-$3,000s.
Bitcoin also remains snarled by congestion on its blockchain as developers work to create more transaction capacity. One solution took effect in August and effectively raised block capacity from 1 megabyte to 1.8 megabytes. A more radical solution, which would double block size, could switch on next month, though this step constitutes a hard fork in Bitcoin’s code and so remains controversial.
Other major cryptocurrencies have had a disparate experience this year while trading in Bitcoin’s shadow. Bitcoin Cash, a Bitcoin offshoot that emerged early in August as the result of a separate hard fork, spiked in value early on but has been trending downward in recent weeks. It was trading at $314 early Thursday, according to Coinmarketcap.com, weeks after soaring into the $900s. By contrast, Ethereum’s Ether currency is trading at just over $300 after starting the year at little more than $8.
Bitcoin’s soaring value has raised questions about its usefulness as a medium of exchange, as holders of the currency may be tempted to hoard it rather than spend it. More than 100,000 merchants worldwide now accept Bitcoin, according to enthusiast site Spendbitcoins.com. These range from obscure Web sites and corner cafes to major retailers like Overstock.com.
Last month, an independent sales organization in Fort Lauderdale, Fla., said it will be the first ISO to enlist merchants for Bitcoin acceptance. Aliant Payment Systems Inc., which has signed up merchants for credit, debit, and automated clearing house acceptance for 14 years, will recruit merchants for Atlanta-based BitPay, one of the world’s biggest Bitcoin exchanges.
And some retailers of high-end merchandise are taking Bitcoin as investors look to spend some of their newfound wealth. Old Road Harley-Davidson, a Santa Clarita, Calif.-based motorcycle dealer, earlier this week sold its first bike to a Bitcoin-paying customer and has a second transaction in process, Michael G. Moffett, the company’s president, tells Digital Transactions News by email. Old Road also accepts Bitcoin for other merchandise, such as helmets and clothing, at its dealership.
Old Road was inspired to accept Bitcoin by the experience of a Lamborghini dealer in Costa Mesa, Moffett told Digital Transactions News last month.