Economy - - Jan 03,2017
Digital currency Bitcoin has started the year on a high, hitting the $1000 mark for the first time in three years on 2nd January.
Bitcoin outperformed all the central bank monitored currencies, scaling a 125 percent climb in 2016. It reached its peak of $1,022 mark, a level it last reached in November 2013, according to CoinDesk data. Its market capitalization exceeded $16 billion.
Bitcoin is an internet-based ‘cryptocurrency’ that has no central authority, instead, it relies on thousands of computers across the world that validate transactions and subsequently add new bitcoins to the system.
Market analysts have suggested that the digital currency’s value may have been boosted in the past year by increased demand in China, largely due to a 7 percent fall in the value of the yuan. It was the Chinese currency’s weakest annual performance in more than 20 years. Market data suggest that most bitcoin trading is done in China.
Bitcoin is considered to be highly volatile. Back in 2013, its value surged tenfold within two months, taking it beyond the $1100 mark. Remarkably, it plunged to under $400 in the following weeks after a hack of the Tokyo-based Mt. Gox exchange. However, it has been somewhat stable in the past two years.
Its biggest swing in 2016 was around 10 percent, still very volatile as compared to central banks’ currencies, but much lower than the trading of 2013, which saw daily price swings of as much as 40 percent.
Another major event this year that raised bitcoin’s value was in June, when a change in bitcoin's underlying rules meant those who were ‘mining the digital currency’ – a process by which users are granted with bitcoins if they solve complex puzzles for a bitcoin transaction to go through – received fewer rewards. This was because of the process called "halving," which reduces the supply of bitcoin.