Bitcoin Surges 24% to New High as Popularity Grows

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Utah Software Engineer Mints Physical Bitcoins
George Frey/Getty Images
By John Phillips

Bitcoin touched a fresh all-time high Monday as the digital currency continued to gain favor with investors.

The virtual currency rose to just under $608 on Mt. Gox exchange Monday afternoon in Asia, up 24.5 percent from the same time Sunday.

Its latest gains come as the potential for regulation hangs over the market, with a U.S. Senate committee to discuss virtual currencies later Monday.

According to Bobby Lee, CEO of BTC China -- the world's largest bitcoin exchange by volume -- the price rise reflects increased awareness about the digital currency.

"There's more awareness of bitcoin following recent press coverage," Lee said, highlighting the bitcoin Singapore conference held last week and recent press coverage in China.

"Asia is known for being an area where people emphasize savings, so when Asia moves it's big regardless of whether it's real estate, gold, stocks or bitcoin. I think that's what we're seeing right now," he said.

Zennon Kapron, managing director of research firm Kapron Asia, agreed:
"The current run-up in price that we're seeing is due to increasing awareness and understanding of bitcoin both inside China and out."

"Anecdotally, in the past week, I've had a number of both professional and personal friends who had never heard of bitcoin before, come to me, ask how it works and what we think all because they read an article or saw a news segment," he said.

"As they start to understand bitcoin and see its potential in the future, they want to be part of that, which is driving up demand. You could think of it as the next segment of the adoption curve coming online," Kapron added.

Another factor at play could be BTC China's announcement Monday that it received $5 million in Series-A financing -- the first round of financing undergone for a new business venture after seed capital -- from institutional investors Lightspeed China Partners and Lightspeed Venture Partners.

BTC China's Lee said the exchange saw a dramatic increase in volume following the announcement, as investments of this nature further underscore bitcoin's status as a legitimate investment option.

Overdone?

Bitcoin has appreciated rapidly over the past year; as of Monday, the value has increased more than 50-fold from $11.00 in mid-November 2012.

While it's hard to say whether or not the recent rise in bitcoin is overdone, some seemed optimistic that this is just the beginning.

"The bitcoin price rally has hardly even begun," said Roger Ver, director of business development at BitInstant, a service that provides fund transfers between and into bitcoin exchanges.

"Because the price is set where the supply meets demand, the price per bitcoin will need to increase substantially to accommodate additional demand," following the recent increase in interest, he said.

BTC China's Lee also noted that while no one can pinpoint where the price will go, the recent rise reflects added pressure to the supply-demand curve.

Hearing Looms

If price is anything to go by investors didn't seem overly concerned before the Committee on Homeland Security and Governmental Affairs' hearing Monday titled "Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies."

BTC China's Lee said he was "cautiously optimistic" on the hearing.

"I myself and many in the industry are actually in support of government regulation in this field," Lee said. "We want to work with the government proactively to recommend the right regulation approach for bitcoin and bitcoin companies."

"At the most basic level, government should try to clarify the necessary licenses for operating bitcoin exchanges," he added.


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