<p><strong>Mike van der Westhuizen and Nishlen Govender | Citadel</strong></p>
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<p>Recent Bitcoin mania has raised a heated debate as to what the world’s largest cryptocurrency (by market capitalisation) is actually worth. Until recently Bitcoin garnered attention from mostly computer science boffins and the criminal underworld, but the 350% price rise since the beginning of the year has started turning heads around the world.</p>
<p>As the famous Wall Street saying goes: “When even shoeshine boys are giving you stock tips, it’s time to sell.” Is this adage warranted in the case of Bitcoin?</p>
<p>Bitcoin’s appeal centres on the fact that it operates independently of any central bank. As such, it is seen as the new age of global currency and payment methods. Of the roughly US$100 billion total cryptocurrency universe, Bitcoin comprises just under half. And although it is prominent now, it has in fact been active since 2009.</p>
<p>Bitcoin’s rapid price acceleration has been attributed to:</p>
<ul>
<li>Japan’s adoption of the currency as an official medium of payment. As well as, possibly, the removal of high-value bank notes in India and Venezuela or even the continued devaluation of the Chinese yuan.</li>
<li>Its potential as a hedge to global market uncertainty.</li>
<li>A relatively smooth “hard fork” – basically a permanent divergence in the (Bitcoin) blockchain which would essentially mean that Bitcoin splits into two different “coins” [Bitcoin and Bitcoin Cash], and hence potentially only one of those would be of real value.</li>
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<p>The technology/algorithm behind Bitcoin, namely blockchain, is a far more powerful platform than Bitcoin itself, in our view. A fintech specialist describing the technology on question-and-answer site Quora said: <em>“Blockchain technology creates a decentralised digital public record of transactions that is secure, anonymous, tamper-proof and unchangeable. Instead of a bank or other intermediary maintaining a private database of records, blockchain technology makes all records public.” </em>Disintermediation is blockchain’s biggest advantage: removing the middle-man ensures that users of the blockchain are in control of their information and transactions, data integrity is affirmed and, in theory at least, transaction times and transaction costs are minimised.</p>
<p>Uses of blockchain technology in the real world include making payments (the most commonly known); supply-chain management (for example, tracking your food at every step from farm or sea to table); smart contracts (including land registries); cloud storage; online voting; trade settlement and payments of grants. Being a relatively new technology there is still much potential to be unlocked in blockchain, and many large corporations are exploring potential uses.</p>
<p>But how should Bitcoin be valued? A key factor is to determine whether it is an asset class and, if so, what the appropriate valuation criteria to assess it might be. There are significant stumbling blocks here as there are no underlying fundamentals that allow us to price or value Bitcoin.</p>
<p>If we assume that Bitcoin is a currency, we would try to ascertain a long-run fair value by using various models: relative purchasing power parity, inflation differentials or interest rate differentials. But these values are impossible to ascertain for Bitcoin given the lack of central bank involvement, the absence of a domiciled area or, indeed, any linking economic fundamentals. If we treat Bitcoin as a basic security, then there are no fundamentals that we can use to assess it, leaving us unable to reach an appropriate valuation assessment.</p>
<p>Despite this stumbling block, there is no doubt that Bitcoin has done exceptionally well. A fact which is clearly evident if you merely consider the performance of the cryptocurrency in recent months (see Figure 1).</p>
<div id="attachment_282021" style="width: 548px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-282021" class="wp-image-282021 size-full" src="http://cnbc.africa/wp-content/uploads/2017/08/Citadel.CryptoCurrency-Graph.png" alt="" width="538" height="263" /><p id="caption-attachment-282021" class="wp-caption-text">Figure 1: Price appreciation over a two-year period (Source – Bloomberg)</p></div>
<p>If we cannot estimate value using traditional criteria, we can still assess a tradeable asset based on its supply and demand. For Bitcoin, we can break down participants into two broad spheres: those using Bitcoin for trading and those who are speculators. We know from anecdotal evidence that Bitcoin still isn’t widely used as legal tender, based on the lack of vendors accepting it and the relative charges from third-party providers that link consumers with vendors. Additionally, as a store of value, it is extremely volatile and an unlikely source for long-term wealth preservation.</p>
<p>There is also a vast portion of trade that could be based on unreported illicit activity, but without further information it is difficult to understand the supply/demand dynamics from those users. We do believe that cryptocurrencies will be used much more in the future but, at present, this represents only about 0.12% of global trade.</p>
<p>If the only way we can value Bitcoin is based on supply and demand, and if those using Bitcoin practically as legal tender comprise just a small part of its demand, then we are left with a large portion of the current demand for Bitcoin being speculative.</p>
<p>With no viable way to determine what price Bitcoin, or any cryptocurrency, should be trading at based on usual valuation criteria, should demand slump it could result in spectacular losses along the lines of those seen during previous bubbles (something which is true even in Bitcoin’s relatively short history).</p>
<p>To fully understand how important underlying fundamentals are, consider the fact that Figure 1 above does not represent Bitcoin but rather BlackBerry from the period 2006 to mid-2008, a time when the brand (within the company RIM), was absolutely soaring: it rose 525% in under three years. Since that peak the stock has lost 92% to its current price. Just consider whether you would have bought or sold the stock during the period in 2008 when it traded at a lofty price. You would consider any number of factors, including the company’s underlying fundamentals, its strategic positioning and the overall competitive landscape.</p>
<p>We believe that the hype and price appreciation of select cryptocurrencies belies any of the underlying traits that we would look for in a sound investment, and rather feeds on optimism regarding the future of cryptocurrencies. We cannot tell you if these currencies are expensive or not, but we believe that without this knowledge it is impossible for us to invest in an asset class that seems to trade purely on momentum and sentiment.</p>
<p>In addition, there are some headwinds which – at least at this stage – could prevent Bitcoin being rapidly and widely accepted. These include:</p>
<ul>
<li>Bitcoin’s transaction processing is relatively slow, handling up to seven transactions per second, whereas service providers like Visa and Mastercard can handle thousands per second.</li>
<li>The size relative to the global monetary base is tiny.</li>
<li>Without acceptance from regulating authorities, involvement in cryptocurrencies by large institutional players and governments will remain limited.</li>
<li>It is unlikely that Bitcoin will replace money in the near to medium term because governments have far too much to lose from this move.</li>
<li>Although Bitcoin can be used pay for goods and services, its heightened volatility negates the definition of a currency as a store of value.</li>
</ul>
<p>Ultimately, Bitcoin is just a mathematical algorithm. There is no doubt that the technology behind bitcoin (blockchain) is revolutionary, bitcoin itself requires much wider acceptance and continual improvement in order for price moves like we’ve seen to be sustainable. Other than its pure (but declining) dominance, Bitcoin has no distinguishable competitive advantage over other cryptocurrencies.</p>
<p>Bitcoin is to cryptocurrencies what the Motorola DynaTAC 8000X was to mobile phones. The first of its kind is not necessarily always the best, and technological innovation changes rapidly. As there is no clear way of accurately valuing any cryptocurrency, it does not instil confidence in making any kind of rational investment decision.</p>
<p>Momentum is a powerful force, and while the price can continue to run, the biggest risk is not missing out but rather in waking up to the realisation that Bitcoin isn’t the chosen one. Just ask BlackBerry.</p>


Bitcoin, blockchain and bubbles: cutting through the hype

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<p>The potential of cryptocurrencies such as bitcoin taking of in developing countries is enormous, but this would mean deliberate conversations between financial institutions and industry leaders.</p>


Bitcoin’s big opportunity in Africa

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In this episode Crypto Trader Host Ran Neu-Ner is joined by Matt Owen, Consultant from Paper Plane Ventures and a team of experts to discuss the Bitcoin fork, initial coin offerings on the radar of venture capitalists and blockchain.In this episode Crypto Trader Host Ran Neu-Ner is joined by Matt Owen, Consultant from Paper Plane Ventures and a team of experts to discuss the Bitcoin fork, initial coin offerings on the radar of venture capitalists and blockchain.</p>


Crypto Trader Ep 3: What caused Bitcoin’s overnight explosion?

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<p>Bitcoin has soared to a new record high and breached the 4000 level over the weekend, marking a rise of over 400 per cent this year. Kunbi Oguneye, CEO of Refitok International joins CNBC Africa for more.</p>


Bitcoin surges to all-time high

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<p>The digital currency bitcoin vaulted to a new record high above $4000 on Saturday, boosted by strong Japanese demand on its way to multiplying its value fourfold this year.</p>
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<p>Bitcoin hit an all-time high of$4,225.40 early Sunday before slightly paring those gains to trade near $4,000, according to CoinDesk.</p>
<div id="inline_movable_ad">The digital currency has now quadrupled in 2017, and is up about 40 percent in August alone. Bitcoin&#8217;s market value is now around $64 billion, up about $10 billion in the last week.</div>
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<p>Bitcoin trade in Japanese yen accounted for nearly 46 percent of global trade volume, up from about a third a day ago, according to CryptoCompare. US-dollar bitcoin trade accounted for about 25 percent, according to CryptoCompare. Bitcoin trade in Chinese yuan and South Korean won accounted for about 12 percent each.</p>
<p>The surge picked up speed in the last week, mirroring gold&#8217;s climb amid a <a href="https://www.cnbc.com/2017/08/11/bitcoin-surges-to-record-in-gold-like-behavior-amid-global-market-sell-off.html">global selloff in stocks and bonds</a>. Rising worries about North Korea&#8217;s nuclear threat have sent investors flocking to perceived safe-havens and alternative assets.</p>
<p>&#8220;Bitcoin is benefitting from geopolitical tensions &#8211; trading in Japan and Korea has increased significantly over the last few months,&#8221; Brian Kelly, a CNBC contributor and head of BKCM, which runs an digital asset strategy, said in an email. He also attributed price gains to investors buying back bitcoin after the Aug. 1 split and greater attention from the Russian government.</p>
<p>Analysts have also noted increased investor interest, especially from institutional investors, after bitcoin successfully survived an Aug. 1 split into bitcoin and bitcoin cash.</p>
<p>This week, Fidelity launched a feature allowing customers to also view their Coinbase bitcoin holdings. The currency also got a boost from Goldman Sachs, which in a report released this week said it is harder for institutional investors to ignore cryptocurrencies like bitcoin.</p>
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<div class="embed-container wildcard">That said, bitcoin&#8217;s future is still uncertain. The digital currency could potentially split again in November, when the second phase of an upgrade proposal called Segregated Witness is implemented.</div>
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<p>Chris Burniske, author of the upcoming book, &#8220;Cryptoassets: The Innovative Investor&#8217;s Guide to Bitcoin and Beyond,&#8221; also noted a sharp pullback in price would not be surprising, given bitcoin&#8217;s rapid surge.</p>
<p>He noted on Twitter that upticks in the bitcoin price and Google searches have historically led to price corrections.</p>
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<p>Bitcoin&#8217;s offshoot, bitcoin cash, traded little changed near $323, according to CoinMarketCap.</p>
<p>Another digital currency, ethereum, traded nearly 5 percent higher near $315.</p>
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<h4 class="subtitle">WATCH: Here&#8217;s what sets Ethereum apart from its rival Bitcoin</h4>
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<p><span class="video-icon"><a class="" href="https://www.cnbc.com/video/2017/06/23/heres-what-sets-ethereum-apart-from-its-rival-bitcoin.html" data-videoid="3000630254" data-videotype=""><img loading="lazy" decoding="async" title="Here's what sets ethereum apart from its rival bitcoin" src="https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/06/23/104547742-104547712_Ethereum_Explainercopy.600x400.jpg?v=1498227151" alt="Here's what sets Ethereum apart from its rival Bitcoin" width="600" height="400" /></a></span></p>
<div class="headline">Here&#8217;s what sets ethereum apart from its rival bitcoin  <time>8:10 AM ET Tue, 27 June 2017 | 02:21</time></div>
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Bitcoin vaults to new record

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<div class="headline">A lot of work going on in blockchain: Barclays UK CEO  <time>8 Hours Ago | 01:03</time></div>
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<p><a class="inline_quotes" href="http://cnbc.com/quotes?symbol=BARC-GB" data-gdsid="10720" data-inline-quote-symbol="BARC-GB">Barclays</a> has been in discussions with regulators and financial technology – or fintech – firms about bringing cryptocurrencies like bitcoin &#8220;into play&#8221;, the bank&#8217;s U.K. chief executive told CNBC on Monday.</p>
<p>Ashok Vaswani revealed that the banking giant has met with Britain&#8217;s Financial Conduct Authority (FCA) watchdog to talk about how to make bitcoin safe in response to a question about whether Barclays could support bitcoin.</p>
<p>&#8220;We have been talking to a couple of fintechs and have actually gone with the fintechs to the FCA to talk about how we could bring, the equivalent of bitcoin, not necessarily bitcoin, but cryptocurrencies into play,&#8221; Vaswani told CNBC at the Money 20/20 fintech conference in Copenhagen, Denmark.</p>
<div id="inline_movable_ad"> &#8220;Obviously (it&#8217;s) a new area, obviously an area we&#8217;ve got to be careful with. We are working our way through it.&#8221;</div>
<p>Vaswani did not expand on to what extent Barclays could be involved with bitcoin. Barclays has recently been involved in the digital currency space. Last year the bank partnered with social payments app Circle. The start-up, which received a license from the FCA last year, allows users to send money to each other in messages, and supports bitcoin. Barclays provided Circle with an account to store sterling, as well as the payments network to transfer money.</p>
<p>Banks have typically been very cautious of being associated with any companies involved with bitcoin due to the cryptocurrencies bad reputation as being used to buy illegal items on the so-called &#8220;dark web&#8221;.</p>
<p>But the world&#8217;s largest cryptocurrency by market cap has seen rising retail investor interest, as well as a major rally since the start of the year that has seen its price hit record highs. Even though the price has pulled back in recent days and there is still volatility, regulators are becoming interested in bitcoin, which is lending legitimacy to the digital currency.</p>
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<div class="headline">Barclays UK CEO: Branches will remain key to banking  <time>8 Hours Ago | 01:38</time></div>
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<p>For example, Japan made it legal for merchants to begin accepting bitcoin as payments and Russia is also looking at ways to regulate it. The FCA in the U.K. has been cautious on bitcoin, however.</p>
<p>Chris Woolard, the FCA&#8217;s executive director of strategy, said that there needs to caution from institutions dealing with bitcoin.</p>
<p>&#8220;We don&#8217;t prohibit regulated firms from engaging in digital currency trading, nor do we prohibit banks from offering banking services to deal with currency firms that use [blockchain]. I am not saying that we view digital currencies as an inherently bad thing… but we do have to exercise a degree of caution,&#8221; Woolard said at a recent event, according to website Financial News.</p>
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<div class="headline">What is Blockchain?  <time>Thursday, 30 Mar 2017 | 2:13 PM ET | 04:44</time></div>
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<p>While bitcoin has garnered plenty of interest recently, the banking industry is focused on using the technology that underpins it called blockchain. This is a distributed public ledger of activity on the bitcoin network. Banks see blockchain-like technology being applied to areas of their businesses from trading to money transfers. The promise is cost savings and faster processes.</p>
<p>Barclays and a number of other banks have been trialing different use cases for blockchain technology. Last year, the U.K. bank <a href="http://www.cnbc.com/2016/04/19/barclays-used-blockchain-tech-to-trade-derivatives.html">tested derivative trading</a> using blockchain technology. Still, the industry admits it is early days and more work needs to be done to integrate this into everyday processes in banks.</p>
<p>&#8220;(We&#8217;re) working on it, (it&#8217;s) not ready for prime time, we&#8217;ll get there soon,&#8221; Vaswani told CNBC.</p>
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<div class="reporter-info"><span class="name"><a href="http://www.cnbc.com/arjun-kharpal/">Arjun Kharpal</a>, </span><span class="title">Technology Correspondent</span></div>
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Barclays wants to bring bitcoin ‘into play’

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<li>Apple co-founder Steve Wozniak says he bought Bitcoin at $700</li>
<li>Bitcoin surged past $3,000 over the weekend</li>
<li>Wozniak said he bought Bitcoin mostly to see what you could do with it.</li>
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<div class="source"><a href="http://www.cnbc.com/todd-haselton/" rel="author">Todd Haselton</a> | <span class="twitter-url"><a href="http://twitter.com/@robotodd">@robotodd</a></span></div>
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<p>Apple co-founder Steve Wozniak revealed he bought bitcoin when it was at at $700 during an interview with CNBC at eMerge Miami on Monday.</p>
<p>Wozniak didn&#8217;t disclose how much he acquired, but the <a class="inline_asset" title="http://www.cnbc.com/2017/06/11/bitcoin-bulls-runs-wild-as-cryptocurrency-surges-above-3000.html" href="http://www.cnbc.com/2017/06/11/bitcoin-bulls-runs-wild-as-cryptocurrency-surges-above-3000.html">cryptocurrency surged above $3,000</a> over the weekend, meaning he gained $2,300 even if he just bought a single bitcoin.</p>
<p>&#8220;I remember getting interested in bitcoin some time ago,&#8221; Wozniak said. &#8220;It was $70 for a bitcoin, man and I went online and you had to have a special bank account at a special bank and I couldn&#8217;t buy any bitcoin so I gave up. Eventually I got some of them at the $700 stage and it went down to $350. I didn&#8217;t invest, I did it so I could play with bitcoin.&#8221;</p>
<p>Wozniak said he wanted to see what it was like to try to shop with bitcoin, at places like restaurants and hotels. &#8220;It&#8217;s not that easy to do yet, but it&#8217;s getting there. I was just playing around trying out how to buy and sell stuff and I didn&#8217;t care I lost a ton of money, but now I&#8217;m way up,&#8221; Wozniak added</p>
<p>Woz also touched on blockchain technology and why he thinks it&#8217;s important. &#8220;I like the blockchain technology,&#8221; he said. &#8220;Every single transaction is noted and saved, and that probably has a lot of good security and traceability and looking-back aspects to it &#8230; That&#8217;s probably why a lot of banks are interested in it.&#8221;</p>
<p>Bitcoin was priced at about $700 in June of last year before losing value, and again in late October and early November before it began skyrocketing in value this year.</p>


Apple co-founder Wozniak bought bitcoin at $700 for fun: ‘Now I’m way up’

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<div id="player_0_104489338_0" class="asset cnbcvideo imgasset desc_size600_400 featuredPromo theplatform-video__docked" data-autoplay="1" data-dockable="1">Bitcoin has more than doubled in price this year alone, but it has been outperformed by its closest rival Ether, which is up over 2,300 percent.</div>
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<p>On January 1, bitcoin was trading at the day&#8217;s high of $1,003.25. On Wednesday, it broke through the $2,300 barrier for the first time to hit a fresh record high of $2,377.32, according to CoinDesk, marking a year-to-date rise of 137 percent. <a href="http://www.cnbc.com/2017/05/19/bitcoin-price-record-high-japan-fork.html" target="_self" rel="noopener">To find out what&#8217;s driving bitcoin&#8217;s rally, read more here</a>.</p>
<p>Meanwhile, bullishness around bitcoin has stoked appetite for other cryptocurrencies. One in particular known as ether is getting traction. Ether has risen from $8.24 on January 1, to a high of $203.30, according to data from Coinmarketcap.com. This represents a 2,367 percent rise year-to-date.</p>
<div id="inline_movable_ad"><strong>What is Ether?</strong></div>
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<p>Ether runs on an underlying technology called Ethereum, which is a different blockchain to the one that underpins bitcoin.</p>
<p>While ether does have digital &#8220;coins&#8221; like bitcoin, companies are more focused on how the Ethereum blockchain could be used in real-world applications.</p>
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<div class="pro-video-chapters fall dyperf dyMonitor" data-adid="535383||1594|||">Ethereum has been designed to support so-called smart contract applications. A smart contract is a computer program that can automatically execute the terms of a contract when certain conditions are met, potentially taking a lot of the human involvement out of completing a deal. <a class="inline_quotes" href="http://data.cnbc.com/quotes/BARC-GB" target="_self" data-gdsid="10720" data-inline-quote-symbol="BARC-GB" rel="noopener">Barclays</a> for example, have <a href="http://www.cnbc.com/2016/04/19/barclays-used-blockchain-tech-to-trade-derivatives.html" target="_self" rel="noopener">used a form of this technology</a> to trade derivatives.</div>
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<h4 class="subtitle">How is it different to bitcoin?</h4>
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<p>Firstly, Ethereum is a lot younger having only been started in 2014, whereas bitcoin began in 2009. Ether&#8217;s market cap is at $18.6 billion versus bitcoin&#8217;s $39.2 billion, according to Coinmarketcap.com.</p>
<p>Ethereum is also <a href="http://www.cnbc.com/2017/03/14/ether-ethereum-cryptocurrency-hits-all-time-high-and-2-billion-market-cap-bitcoin.html" target="_self" rel="noopener">focused on smart contracts</a>, while bitcoin is very much about payment technology.</p>
<p>http://cnbc.africa/news/2017/01/02/bitcoin-three-year-high/</p>
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<h4 class="subtitle">Why has ether rallied so much?</h4>
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<p>While bitcoin has been getting support from certain governments and investors, the Ethereum blockchain has been backed by corporates wishing to use the technology for smart contract applications.</p>
<p>A group called the Enterprise Ethereum Alliance (EEA) was recently founded to connect large companies to technology vendors in order to work on projects using the blockchain. Companies involved in the launch include JPMorgan, Microsoft and Intel.</p>
<p><a href="http://www.cnbc.com/2017/05/23/bigger-than-bitcoin-enterprise-ethereum-alliance-grows-in-size.html" target="_self" rel="noopener">On Tuesday, the EEA announced</a> another 86 firms joined the alliance, which is adding growing legitimacy to the cryptocurrency.</p>
<p>At the same time, the rally in bitcoin has seen investors turn to alternative digital currencies as well as attracting a broader investment base. A year ago, over 83 percent of ether buying happened with bitcoin, according to data from CryptoCompare, showing that it was mainly crytocurrency enthusiasts interested in it. As of Wednesday, bitcoin accounted for just over 32 percent of trade while fiat currencies such as the U.S. dollar and Korean won have risen sharply.</p>
<p>&#8220;Yes the direct fiat flow options are a fleshing out of the ethereum ecosystem and show its broad appeal,&#8221; Charles Hayter, CEO of CryptoCompare, told CNBC by email.</p>
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<h4 class="subtitle">Will the rally last?</h4>
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<p>Not all in the market are convinced that the ether rally will last. Bitcoin trader Jason Hamilton is worried that products like Ethereum could be cloned.</p>
<p>&#8220;People are buying a specific blockchain, but the big interests are in the technology. They&#8217;ll probably make their own clones and the ether tokens everyone is buying won&#8217;t be used for much except trading. Who knows, though,&#8221; Hamilton told CNBC via a direct message on Twitter.</p>
<p>&#8220;I don&#8217;t usually trade ether. I&#8217;m afraid of that bubble bursting, but it could go on bubbling up for a long time still.&#8221;</p>
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Bitcoin may have more than doubled this year, but this rival is up 2,000 percent. Here’s why

<p>Arjun Kharpal</p>
<ul>
<li>The WannaCry ransomware hackers have received around $50,000 worth of bitcoin so far.</li>
<li>The amount the hackers will demand is expected to double from $300 to $600 on Monday.</li>
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<p>Hackers who locked files on 200,000 computers globally and asked for a <a class="inline_quotes" href="http://data.cnbc.com/quotes/BTC%3D-USS" target="_self" data-gdsid="76662810" data-inline-quote-symbol="BTC=-USS" rel="noopener">bitcoin</a> ransom payment to unlock them, have only made around $50,000, an industry source told CNBC, despite the large scale of the attack.</p>
<p>On Friday, a <a href="http://www.cnbc.com/2017/05/14/cyber-attack-hits-200000-in-at-least-150-countries-europol.html" target="_self" rel="noopener">virus known as WannaCry</a> infected machines across 150 countries. It&#8217;s known as ransomware which is a malicious piece of software that encrypts a user&#8217;s files then demands them pay money to unlock them. In this case, the hackers asked for $300 worth of bitcoin.</p>
<p>James Smith, CEO of Elliptic, a London-based start-up that helps law enforcement agencies track criminals using the cryptocurrency, said his company had uncovered that since Friday, around $50,000 worth of bitcoin payments have been made to the hackers by 7 a.m. ET on Monday. This was up from $45,000 at 4 a.m. ET.</p>
<p>&#8220;We have seen the number of payments start to go up today,&#8221; Smith told CNBC Monday.</p>
<p>After 72 hours from when the attack started on Friday, the hackers said the fine would double to $600, and after seven days, the files would be permanently locked.</p>
<p>&#8220;We think over the course of today as we approach the first deadline where fines double we will see a bigger increase (in bitcoin payments),&#8221; Smith added.</p>
<p>The amount paid so far is still a small amount despite the global nature and scale of the attack. Security experts and government agencies have been urging people not to pay the ransom.</p>
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<h4 class="subtitle">Why payments have been slow</h4>
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<p>One of the major reasons for the slow payments is perhaps because many people wouldn&#8217;t know how to obtain and pay in bitcoin.</p>
<p>&#8220;If a business is told it needs to pay this amount of bitcoin, most companies will be asking what bitcoin is … it&#8217;s not straightforward,&#8221; Smith explained.</p>
<p>Obtaining large amounts of the cryptocurrency might take some time, and then setting up an account via a bitcoin wallet and exchange would also require a long onboarding process.</p>
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<p>At the same time, researchers have seen no evidence that paying the cybercriminals necessarily unlocks your files.</p>
<p>&#8220;The decryption process itself is problematic, to say the least,&#8221; cybersecurity firm Check Point said in a blog post on Sunday.</p>
<p>&#8220;Unlike its competitors in the ransomware market, WannaCry doesn&#8217;t seem to have a way of associating a payment to the person making it. Most ransomware … generate a unique ID and bitcoin wallet for each victim and thus know who to send the decryption keys to. WannaCry, on the other hand, only asks you to make a payment, and then … wait.&#8221;</p>
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<h4 class="subtitle">Tracing bitcoin</h4>
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<p>Hackers who deploy ransomware often ask for payments in bitcoin as it is often believed to be completely anonymous. But law enforcement agencies, working with companies like Elliptic, have figured out ways to trace this.</p>
<p>It traces so-called bitcoin addresses back to people. These addresses are required to make payments to other people or organizations. At the moment, Elliptic is working on trying to trace the payments, but Smith said this would become clearer when the hackers try to withdraw their bitcoin in fiat currency.</p>
<p>&#8220;The attackers haven&#8217;t moved it. In previous cases we have been able to work with law enforcement to see where the funds move because ultimately the attacker wants to turn it back into a currency they want to spend,&#8221; Smith explained.</p>
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Hackers who infected 200,000 machines have only made $50,000 worth of bitcoin

<p><a class="inline_quotes" href="http://data.cnbc.com/quotes/BTC%3D-USS" target="_self" data-gdsid="76662810" data-inline-quote-symbol="BTC=-USS" rel="noopener">Bitcoin</a> is &#8220;fully valued&#8221; and could see a pullback in the short term after hitting $1,600 for the first time on Monday, according to one investor, but the price could go as high as $4,000 over the next 14 months.</p>
<p>The cryptocurrency has been on an <a href="http://www.cnbc.com/2017/04/27/bitcoin-jumps-to-a-new-all-time-high-above-1300-capping-20-april-surge.html" target="_self" rel="noopener">upward move since April</a> and was trading around $1,575.52 by early afternoon trading in London after hitting an all-time high $1,601.05 during morning trade, according to the Coindesk bitcoin price index.</p>
<p>In the last 30 days, bitcoin has risen over 33 percent.</p>
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<p><strong>Negative bitcoin news</strong></p>
<p>The rally may seem perplexing given that there have been a number of setbacks for the cryptocurrency.</p>
<p>These include:</p>
<ul>
<li>The U.S. Securities and Exchange Commission (SEC) <a href="http://www.cnbc.com/2017/03/10/reuters-america-us-sec-rejects-application-to-list-bitcoin-etf.html" target="_self" rel="noopener">deciding to reject</a> a bitcoin exchange-traded fund (ETF) proposed by Cameron and Tyler Winklevoss. This is now <a href="http://www.cnbc.com/2017/04/26/bitcoin-price-sec-winklevoss-etf-review.html" target="_self" rel="noopener">under review</a> however. An ETF would have given further credibility to bitcoin and helped more institutional investors get involved.</li>
<li>A fierce debate over the future of bitcoin&#8217;s structure. The <a href="http://www.cnbc.com/2017/03/17/bitcoin-price-blockchain-fork-ethereum.html" target="_self" rel="noopener">full explanation can be read here</a>.</li>
<li>Issues with some exchanges, particularly Bitfinex, which cut off their access to the banking system meaning customers couldn&#8217;t make withdrawals in fiat currency.</li>
</ul>
<p><strong>So why the rally?</strong></p>
<p>At the same time, there have been some positive developments.</p>
<p>Firstly, <a href="http://www.cnbc.com/2017/04/12/bitcoin-price-rises-japan-russia-regulation.html" target="_self" rel="noopener">Japan legalized the cryptocurrency</a> as a payment method recently and this has led to a greater amount of bitcoin being bought with yen, according to Aurelien Menant, founder and CEO of Gatecoin, a regulated blockchain assets exchange based in Hong Kong.</p>
<p>The second reason could be to do with a change in the code of another cryptocurrency called litecoin.</p>
<p><strong>What happened with litecoin and why does it matter to bitcoin?</strong></p>
<p>Last month, there was a change in the code behind the technology that underpins litecoin. It is known as Segregated Witness (SegWit) and it allows the speed of transactions using the cryptocurrency to increase.</p>
<p>This has given hope that bitcoin could see a similar thing.</p>
<p><strong>Fork debate recap</strong></p>
<p>To understand the issue, it&#8217;s key to look at how bitcoin transactions are processed. Transactions by users are gathered into &#8220;blocks&#8221; which is turned into a complex math solution. So-called miners, using high-powered computers work these solutions out to determine if the transaction is possible. Once other miners also check the puzzle is correct, the transactions are approved and the miners are rewarded in bitcoin.</p>
<p>But there is a big backlog in transactions and the speed at which these are processed is slowing. That&#8217;s because the rules of bitcoin only allow a certain amount of transactions through in one block.</p>
<p>In mid-March, the price of bitcoin saw a big drop because the community was afraid of a so-called &#8220;hard fork&#8221; which could <a href="http://www.cnbc.com/2017/03/17/bitcoin-price-blockchain-fork-ethereum.html" target="_self" rel="noopener">have led to two blockchains forming</a>, and therefore two separate cryptocurrencies.</p>
<p>But the example of litecoin shows that a so-called &#8220;soft fork&#8221; can happen which would increase the block size for bitcoin without major disruption.</p>
<p>&#8220;That example of a successful soft fork in litecoin has made people start to think that we could get a successful SegWit implementation in bitcoin and that could increase capacity and move us to the next level,&#8221; Daniel Masters, director at Global Advisors Bitcoin Investment Fund (GABI), told CNBC by phone.</p>
<p>GABI is an investment fund that is listed on The International Stock Exchange on the Channel Islands.</p>
<p><strong>And what does this mean for price?</strong></p>
<p>While bitcoin has seen a recent rally, previous peaks have seen sharp pullbacks in prices. Masters said the price rise has been &#8220;violent in the short-term&#8221; with bitcoin &#8220;fully valued for the moment&#8221;. This could lead to a pullback to around $1,100.</p>
<p>However, the long-term outlook remains strong.</p>
<p>&#8220;In the 8- to 14-month horizon, my forecast would be around $4,000,&#8221; Masters told CNBC.</p>
<p>Others also expect high prices. Gatecoin&#8217;s Menant said prices should climb beyond $3,000 this year.</p>


Bitcoin hits $1,600 for the first time and one investor says it could rally to $4,000 in a few months

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<p><a href="http://www.cnbc.com/arjun-kharpal/" rel="author">Arjun Kharpal</a> | <span class="twitter-url"><a href="http://twitter.com/ArjunKharpal">@ArjunKharpal</a></span></p>
<p>Just under $2 billion has been wiped off the value of <a class="inline_quotes" href="http://data.cnbc.com/quotes/BTC%3D-USS" target="_self" data-gdsid="76662810" data-inline-quote-symbol="BTC=-USS" rel="noopener">bitcoin</a> in under three days as a fight over the future of the technology underpinning the cryptocurrency wages on.</p>
<p>Bitcoin was trading at around $1,142.60 at time of publication, giving it a market cap of $18.53 billion, according to CoinDesk data. This is down from highs of $1,255.32 on Tuesday, which valued the total bitcoin pile at $20.36 billion.</p>
<p>Meanwhile, rival cryptocurrency ether is up over 84 percent from highs of $29.87 on Tuesday to trading at all-time highs of around $55 on Friday, according to Coinmarketcap.com. The market captilization shot from $2.68 billion to $4.95 billion. It is the only other cryptocurrency to be valued at over $1 billion.</p>
<div id="inline_movable_ad"> Much of the inverse price movement stems from traders&#8217; worries over the future of bitcoin and the underpinning blockchain technology.</div>
<p><strong>What&#8217;s happened?</strong></p>
<p>To understand the issue, it&#8217;s key to look at how bitcoin transactions are processed. Transactions by users are gathered into &#8220;blocks&#8221; which is turned into a complex math solution. So-called miners, using high-powered computers work these solutions out to determine if the transaction is possible. Once other miners also check the puzzle is correct, the transactions are approved and the miners are rewarded in bitcoin.</p>
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<p><img loading="lazy" decoding="async" src="http://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/01/02/104195250-GettyImages-507405826.530x298.jpg?v=1483358085" alt="" width="530" height="298" /></p>
<div class="attribution">Chris Ratcliffe | Bloomberg | Getty Images</div>
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<p>But there&#8217;s a massive backlog of transactions in bitcoin that are waiting to happen. The number of outstanding transactions is up more than four times from just six months ago, according to data from bitcoin wallet Blockchain. This is bad for a system that has promised fast and cheaper transactions than the traditional financial system.</p>
<p>Because of this, a group called Bitcoin Unlimited has emerged. This faction is suggesting increasing the size of the block which would allow more transactions to be bunched together and processed. Major bitcoin industry players including Roger Ver have backed the plan. But some developers in the community suggest that increasing the block size could be unsafe.</p>
<p><strong>What&#8217;s this about a fork?</strong></p>
<p>The real concern is if Bitcoin Unlimited gains major support, it could have an impact on the underlying blockchain technology that supports bitcoin. Bitcoin Unlimited has about an 11 percent market share of all the &#8220;nodes&#8221; in existence. Nodes are the backbone of bitcoin&#8217;s infrastructure and refer to those mining the transactions as well as those tracking the movement of bitcoin to make sure it is all working correctly.</p>
<p>Nodes can run Blockchain Unlimited software which would signal their support for increasing the block size. If 50 percent of bitcoin miners adopted Bitcoin Unlimited, there would then be two major blockchains and a &#8220;fork&#8221; would be created made of Bitcoin Core, the current main software behind the infrastructure, and Bitcoin Unlimited.</p>
<p>Both blockchains would continue to run as long as there are nodes running them. But there would then be essentially two different coins – Bitcoin and Bitcoin Unlimited.</p>
<p><strong>So why has the price fallen?</strong></p>
<p>And this is why bitcoin has seen sharp declines in price, while other cryptocurrencies like ether have gained support.</p>
<p>&#8220;Bitcoin traders may have wanted to offset some of their exposure should a fork occur or the scaling deadlock continue, and ether seems to be the most promising alternative. Bitcoin-ether volumes have surged since and are currently rivaling bitcoin-fiat currency trading liquidity,&#8221; Aurélien Menant, founder and CEO of Gatecoin, a regulated blockchain assets exchange based in Hong Kong, told CNBC by email on Friday.</p>
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Nearly $2 billion has been wiped off bitcoin’s value in three days all because of a fork

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<p><a href="http://data.cnbc.com/quotes/BTC%3D-USS" target="_blank" class="inline_quotes" data-gdsid="76662810" data-inline-quote-symbol="BTC=-USS" rel="noopener">Bitcoin</a> tanked as much as 23 percent Thursday afternoon after nearing an all-time high earlier in the trading day. ﻿</p>
<p>The world&#8217;s largest cryptocurrency by market cap traded as low as $887.47, down from the day&#8217;s high of $1,153.02, according to CoinDesk data. The high for the day was just shy of $1,165.89 set on November 30, 2013. The price has recovered somewhat from the day&#8217;s low to about $973.89 at the time of publication.</p>
<div class="teads-inread">
<div class="teads-player"><strong>READ:</strong> <a href="/news/financial/2017/01/02/bitcoin-three-year-high/">Bitcoin breaks $1,000 level, highest in more than 3 years &#8211; CNBC Africa﻿</a> </div>
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<div class="attribution">However, bitcoin beat its high on some other cryptocurrency exchanges. Whereas CoinDesk&#8217;s price index takes into account many different bitcoin exchanges – individual exchanges, where users can trade bitcoin, noted their own highest prices were exceeded. Among these were one of China&#8217;s biggest and most liquid exchanges, BTC China.</div>
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<div>Industry experts said the rapid rally in bitcoin created a little bubble which is now bursting but the long-term prospects are still positive.</div>
<p>&#8220;Once we broke through the nominal all-time high, liquidity dried up – no shorts, no sellers, which means a volatile little bubble formed quickly,&#8221; Peter Smith, chief executive of bitcoin wallet Blockchain, told CNBC by email.</p>
<p>&#8220;We are seeing the effects of that now. It&#8217;s still fairly thin trading volume though. I expect the market will find a floor and stabilize somewhere in the $850 to $1,000 range, but we&#8217;ll see.&#8221;</p>
<p>Wild swings in bitcoin&#8217;s price are not unusual and volatility is a characteristic of the virtual currency.</p>
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<h4 class="subtitle">Yuan rise behind bitcoin fall?</h4>
<p><a href="http://www.cnbc.com/2017/01/02/bitcoin-breaks-1000-level-highest-in-more-than-3-years.html" target="_blank" rel="noopener">CNBC recently outlined</a> the reason behind the latest rally in bitcoin. One key reason has been the recent devaluation of the yuan as well as the threat of capital controls across many countries. The majority of bitcoin trade comes out of China so it has a big influence.</p>
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<p>But on Thursday, the <a href="http://www.cnbc.com/2017/01/04/chinas-offshore-yuan-surges-most-against-dollar-in-a-year.html" target="_blank" rel="noopener">yuan rose against the dollar</a>. The reason behind this was a sell-off in the dollar due to uncertainty around the future of U.S. Federal Reserve rate hikes, as well as <a href="http://www.cnbc.com/2017/01/04/china-steps-in-to-support-yuan-again-as-trump-inauguration-nears.html" target="_blank" rel="noopener">state intervention by China</a> in its currency. The rise in the yuan led to a fall in bitcoin.</p>
<p>&#8220;It is absolutely tied to China. If the yuan goes up, bitcoin goes down,&#8221; Dan Collins, CEO of technology consultancy firm CCO Global, told CNBC in an interview on Thursday.﻿</p>
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Has Bitcoin's bubble just burst?

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<p>The price of <a href="http://data.cnbc.com/quotes/BTC%3D-USS" target="_blank" class="inline_quotes" data-gdsid="76662810" data-inline-quote-symbol="BTC=-USS" rel="noopener">bitcoin</a> has breached the $1,000 mark, hitting a more than three-year high on Monday.</p>
<p>The cryptocurrency was trading at $1,021 at the time of publication, according to CoinDesk data, at level not seen since November 2013, with its market capitalization exceeding $16 billion.</p>
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<p>Bitcoin has been on a <a href="http://www.cnbc.com/2016/12/13/bitcoin-hits-a-34-month-high-amid-chinese-stock-market-volatility-yuan-falls.html" target="_blank" rel="noopener">steady march higher</a> for the past few months, driven by a number of factors such as the devaluation of the yuan, geopolitical uncertainty and an increase in professional investors taking an interest in the asset class.</p>
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<p>&#8220;We are seeing the aftermath of zero interest rates run amok. So bitcoin is a healthy reminder that we don&#8217;t have to hold on to dollars or renminbi, which is subject to capital controls and loss of purchasing power. Rather it&#8217;s a new asset class,&#8221; Bobby Lee, chief executive of BTC China, one of the world&#8217;s largest bitcoin exchanges, told CNBC by phone.</p>
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<div class="embed-container image" itemscope="" itemtype="http://schema.org/ImageObject">China is the source of the majority of trade in bitcoin and the devaluation of the yuan and fears over capital controls have contributed to the recent spike in the digital currency.</div>
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<p>But several other factors have also had a notable impact. For example, bitcoin&#8217;s price has appreciated around 137 percent in the past 12 months but got a big boost after Donald Trump won the U.S. election in November.</p>
<p>Another big event this year was in June when a change in bitcoin&#8217;s underlying rules meant those who were &#8220;mining&#8221; the cryptocurrency – a process whereby users are awarded with bitcoin if they solve complex mathematical puzzles in order for a bitcoin transaction to go through – received less rewards. This was due to the <a href="http://www.cnbc.com/2016/06/13/bitcoin-hits-a-2-year-high-thanks-to-a-big-change-in-the-code-and-china-yuan.html" target="_blank" rel="noopener">process known as &#8220;halving,&#8221;</a>which essentially reduces the supply of bitcoin.</p>
<p>But overall, bitcoin experts said that the market is growing in terms of volumes and those participating, creating a &#8220;network effect&#8221; that will see the price rise further.</p>
<p>&#8220;The value of Uber in any city is directly dependent on the number of drivers and number of users, it&#8217;s not linear it&#8217;s exponential. The same is true of the value of bitcoin,&#8221; Lee said.﻿</p>
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<p> </p>


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