Why Has Bitcoin’s Price Gone Up So Fast?

The average cost of a Bitcoin crossed $16,000 on Thursday, though on some individual exchanges where it is traded, the value was even greater.

SAN FRANCISCO — Bitcoin has been in a bull market like few the world has ever seen.

At the beginning of the year, the price of a Bitcoin was below $1,000. It hit $5,000 in October, then doubled by late November. And on Thursday, less than two weeks later, the price of a single Bitcoin rose above $20,000 on some exchanges, according to Coinmarketcap.

The latest price spike has been credited to signs that Wall Street companies plan on bringing their financial heft into the market.

At the current cost, the value of all Bitcoin in circulation is about $300 billion. To get a sense of how big that is, all the shares of Goldman Sachs are worth about $90 billion.

The gains have been driven by several other factors — perhaps the most important being the irrational mentality that can take over in speculative bubbles.

But most people buying Bitcoin are doing so in the belief that others will want it even more in the future. The gains, though, have many people, even Bitcoin believers, anticipating a big crash.

Bitcoin used to be all about libertarians and black-market trade. Are those still driving the price?

The fringe communities that drove Bitcoin in its early years are playing a much less important role in the current rally.

Many investors have said the most important factor driving the current enthusiasm is the entry of hedge funds and other institutional investors.

The path for large investors has been smoothed by the Chicago Mercantile Exchange and Chicago Board Options Exchange, which have been racing to roll out Bitcoin futures contracts. Most banks are already signed up with these exchanges and consequently can immediately begin trading the contracts. The options exchange has said it plans to start trading on Sunday.

It is still unclear how the arrival of Bitcoin futures will influence the demand for the digital tokens.

With a futures contract, banks can bet on the price of Bitcoin without holding the underlying Bitcoins. This is expected to bring many new players into the market who don’t want to deal with the complications of holding Bitcoins.

But the futures contract will also allow investors to short Bitcoin, or bet on the price’s going down, which has been hard to do until now. Some analysts think this could put downward pressure on the price. Other market participants have worried that Bitcoin futures could spread the risks of Bitcoin into the rest of the financial system.

People still use Bitcoin and other virtual currencies to make ransom payments and buy illegal goods online, including synthetic opioids. But that activity has been on the wane since the authorities shut down some of the largest online black markets this year.

What role are smaller investors playing in the virtual currency markets?

Individual investors have been just as active as large investors.

Nowhere has the phenomenon of ordinary people buying virtual currencies been more visible than in South Korea, where several exchanges have storefronts to help new customers. This is all the more remarkable because just a year ago, Koreans showed almost no interest in these markets…

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