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Old 11-28-2017, 09:12 PM
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Bitcoin crossed the $10,000 mark for the first time in its nine-year history,

The rally has transformed the virtual currency from a curiosity to a hot topic for mainstream investors.

On Tuesday at around 8:30 p.m. Eastern time, the digital currency passed the threshold to trade at $10,025.96 and is up 21% just since Friday, according to research site CoinDesk. For the year, it is up 933%, having started 2017 at $ 968.23!

It is one of most notable surges in a generally positive year for asset prices. Through trading Tuesday, the S&P 500 is up 17% in 2017 and the Dow Jones Industrial Average has jumped 21%. The Nikkei 225 is up 18%. Gold has added about 13% and copper is up 23%. In recent months, investors have set aside doubts about bitcoin's use by criminal elements and focused instead on the potentially transformative technology behind it and the prospect that it could replace gold as an investment to hold when faith ebbs in fiat currencies.

"We now have millions of active users," said Peter Smith, chief executive of bitcoin services firm Blockchain.info. "We didn't have a million last year."
Big institutions such as CME Group Inc. and Goldman Sachs Group Inc. have stoked enthusiasm about bitcoin's place in the world by exploring products based on the virtual currency. CME, the world's biggest exchange group, is expected to launch a futures contract based on bitcoin as soon as the second week of December.

For all its appreciation among investors, bitcoin is still controversial. South Korea's prime minister on Tuesday warned that the lure of fast money could prove detrimental and encourage crime. The manic rally "has led to cases where young people and students get involved with cryptocurrencies to earn money," Prime Minister Lee Nak -yon said in remarks at a Tuesday cabinet meeting released by his office. "If we let things continue, I feel that it will lead to some serious distorted or pathological phenomenon."

Most individual investors aren't making much money from the rally. About 75% of bitcoin addresses, also known as wallets, have less than 0.1 bitcoin in them, according to research site BitInfoCharts. Pete Ferro, a 66-year-old small-business owner who resides in Brick, N.J. , said he started researching cryptocurrencies in the spring before ultimately diving in. "When I first learned about it, I thought it was too sketchy, too uncertain, too risky," he said. "Then I saw it creeping up higher and higher. I didn't invest a lot, but I'm learning as I go along." With advice and guidance from his daughter's 34-year-old boyfriend, he plunked $3,000 in June into ripple and litecoin, two smaller virtual currencies. He avoided bitcoin because he thought it was expensive. "I kick myself for not going in then because now it skyrocketed."
Investors and traders have been attracted by bitcoin's volatility in a low-interest-rate market where stocks and bonds have plodded to slower gains. While technology stocks have rallied sharply, few have jumped 10-fold like bitcoin has this year, or even more than that in the case of the smaller virtual currencies, ethereum, ripple and litecoin.

Bitcoin was introduced in 2008 by a pseudonymous actor calling himself Satoshi Nakamoto. His vision was for an online currency that could be exchanged between peers, without governments or banks standing in the middle. The concept has gained fans among those who believe that "unbanked" residents of poorer countries can use bitcoin and other mobile money options to participate more fully in the financial system.
But the currency's growth has also attracted critics like J.P. Morgan Chase & Co. CEO James Dimon and Berkshire Hathaway Chairman Warren Buffett, who has argued that governments likely will ultimately crack down, crushing bitcoin's price.

"Bitcoin is a speculative bubble that will pop at some point," wrote Michael Oliver, a market analyst at Momentum Structural Analysis in North Carolina. Much like the dot-com bubble, however, the sector will become more mature after its reckoning, he says. Much of this year's growth has come from Japan. On April 1, Japan's Financial Services Agency put in place new rules for bitcoin, which recognized it as a legitimate payment method. Japan quickly became one of the largest markets for bitcoin, currently representing about 60% of all trading.

While bitcoin's $166 billion market value now rivals that of General Electric Co. or the monetary base of Venezuela, the use of its network isn't keeping pace. The number of bitcoin transactions on a daily basis has been consistent in 2017. In January, daily transactions averaged between 250,000 and 300,000. It fell during the summer, then regained near-peak levels in the fall.
Bitcoin's price rise has come during an intense feud within the industry over the currency's future. Because of its growth, the bitcoin network can't efficiently process all the transactions its gets, forcing users to offer fees in exchange for faster trade confirmations. Those fees average around $5, but rose to nearly $20 earlier this month. Partially in response to such fees, some bitcoin market participants wanted to expand the network's capacity, but their efforts have fallen short. That makes bitcoin less useful as a means of exchange, leaving it as more of a store of value.
In other words, coffee-shop customers may no longer be interested in paying for their morning order in bitcoin instead of with a credit card. But if they invested in bitcoin, they could probably afford to buy a cup for all their friends.

Eun-Young Jeong contributed to this article.
Write to Paul Vigna at [email protected] and Steven Russolillo at [email protected]

(END) Dow Jones Newswires
11-28-17 2149ET
Copyright (c) 2017 Dow Jones & Company, Inc.
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