Bitcoin prices surged Friday after news the United Kingdom would leave the European Union sent investors out of stocks, commodities and the British pound, which dropped to a three-decade low.
The price of the digital currency spiked as high as $680.19 from a $625.50 late Thursday and recently traded up 5% at $656.83, according to CoinDesk.
The gain follows a turbulent two weeks for the currency, which is “mined” by solving complicated computer problems. Bitcoin fans say the digital currency trumps traditional assets because of its security — the unique codes that exist for every bitcoin transaction.
Prices hit a two-year high last week, then dove 21% earlier this week.
The latest gains can be chalked up to a flight to alternative currencies after U.K. voters shocked global markets by choosing to leave the European Union. After rallying Thursday, U.S. stocks had their worst day in 10 months, with the Dow Jones Industrial Average losing over 600 points to 17,400. The Euro Stoxx 600 dropped 7%. Gold, often viewed as safe haven amid risk, rallied.
Chris Burniske, Blockchain analyst at ARK Invest, said people are afraid of the fluctuations in capital markets and they are looking for assets that don’t have a correlation to capital markets. Bitcoin is this asset.
But with the possibility of high reward comes the possibility of high risk for investors. Mark Williams, professor of financial risk management at Boston University, said people need to be aware of the price risk that comes with investing in bitcoin.
Bitcoin’s moves can be 10 times greater than the U.S. dollar on one day, according to Williams.
“This currency commodity has almost doubled in a year,” Williams said. “But what can move by almost 100%, can drop as dramatically.”
The second risk is liquidity, he says. Bitcoin must be sold through various exchanges, a process that can sometimes take hours.
However, Burniske feels as though the commodity that was once considered to be a, “fringe, dark technology,” has proven it is here to stay. Although it has gone through major ups and downs, over a long-term Bitcoin’s volatility has gone down significantly.
“What you’re seeing now is the second coming of bitcoin in a way that it’s presenting itself more to the mainstream,” Burniske said. “This shows to people there’s a fundamental innovation going on and it is enjoying sustained strength and isn’t going away.”