Bitcoin bubble? Virtual currency at record high

A VIRTUAL CURRENCY with no government or central bank backing it has seen its value double to record highs in less than two weeks - but many have warned the Bitcoin bubble will soon burst.

Dubbed the "Harlem Shake" of the currency world, frenzied buying of Bitcoin sent its stock value past $1.6 billion yesterday, a record high. The value soon fell back to around $1.4 billion, or around $117 per Bitcoin.

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City AM reports the digital currency has risen in popularity in the wake of the Cypriot banking crisis, as investors look for money perceived as free from bank instability and monetary policy reforms. It is believed Cypriots have traded euros for the currency, which has in turn driven up its value.

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Bitcoin was founded in 2009 by an anonymous developer known only as Satoshi Nakamoto in order to avoid detection while trading goods. City AM explains the exchanges for the currency were soon set up where it could be anonymously traded. Today, The Guardian reports the currency is usually used for "running drugs" and "laundering money".

The Guardian's Heidi Moore believes the Bitcoin boom is just a bubble, explaining the virtual currency is like a "commodity". "No one will print more Bitcoins, for instance. There are currently 10.8 million and they'll cap out in 2140," she writes. "There are still only around $800 million of Bitcoins in circulation, a tiny amount in a world economy that moves in trillions, and nothing like any serious currency. It is Bitcoin's sudden, enormous increase in value makes it worthy of attention."

The currency is a volatile beast: in 2011 a spike took the price of a single Bitcoin from $2 to over $30 before it plunged back to its starting point.