REFILE-Biting back: bitcoin heads for best month in 1-1/2 yrs


(fixes headline)

By Jemima Kelly

LONDON Oct 30 (Reuters) – Bitcoin has just recorded its
best month since May 2014, stealing the spotlight away from the
blockchain technology that underpins it and which has been
attracting investment from almost every major bank in the world.

An investor in bitcoin at the start of October would have
enjoyed a return of over 36 percent, dwarfing the
return of about 2 percent that the dollar racked up for its
holders.

The web-based currency surged to its highest this year on
Friday, hitting $334.05 on the Bitstamp exchange on
its ninth successive day of gains, its best run in over two
years.

Bitcoin is used as a vehicle for moving money around the
world quickly and anonymously via the web without the need for
third-party verification. That has made it controversial, but
also attractive, to users ranging from drug dealers to those
trying to circumvent capital controls in Greece and China.

Some bitcoin traders speculate that the latter might be
partly responsible for the digital currency’s latest surge. Most
trading in the past month has come from Chinese bitcoin
exchanges, according to Bitcoinity.org, though the accuracy of
the Chinese exchanges’ data is questioned.

“At a time of central bank currency devaluations, direct and
indirect, and with gold’s directionless behaviour over the last
two years … bitcoin is increasingly viewed and marketed as a
possible investable vehicle,” said London-based trader Ashraf
Laidi, who invests in both fiat currencies and bitcoin.

Bitcoin is often dismissed as too volatile to invest in,
having soared towards $1,200 in late 2013 before sliding to
below $400 less than a month later, but it has stabilised this
year.

“What I’m happy about so far is that the price run-up hasn’t
been overly dramatic or disorganised,” said Peter Smith, CEO of
Blockchain, a bitcoin “wallet” or storage provider, which shares
its name with the technology.

EU RULING

Last week the European Union’s top court ruled that bitcoin
should be treated like any other means of payment and therefore
be exempt from value-added tax – a decision many in the industry
say helped push up bitcoin’s price.

“It just makes bitcoin a lot more usable as a currency in
Europe and also provides a lot of clarity to people who are
speculating and trading in it,” said Tom Robinson, co-founder of
London-based bitcoin storage firm Elliptic.

Another reason for the price surge might be that bitcoin
supply is set to grow more slowly.

The blockchain is secured by a network of computers that
compete with each other to solve mathematical problems for a
reward. That is currently 25 bitcoins every 10 minutes, but that
will be halved to 12.5 bitcoins next year.

In the same way that scaling back quantitative easing would
prop up a traditional fiat currency, bitcoin could be boosted by
the conventional economics of supply and demand.

Although many say the technology behind bitcoin holds more
potential than bitcoin itself and can function without it,
bitcoiners argue that the blockchain supporting the currency is
the only one to have been properly tested.

An increased focus on the technology is helping prop up the
price, they say.

“The idea of blockchain and bitcoin are completely
inseparable,” said Michael Sonnenshein, a former JPMorgan banker
who is now head of business development at Grayscale
Investments, a New York-based bitcoin investment firm.

“The blockchain is only as secure and as powerful as it is
because there is this constant movement of tokens (bitcoins) on
the blockchain.”

(Reporting by Jemima Kelly; Editing by Tom Heneghan)

TheBitcoinNews.com – leading Bitcoin News source since 2012