German central bank warns people not to buy bitcoin as price skyrockets

10 May 2017

Image: yuruphoto/Shutterstock

As bitcoin reaches a new record price, the German central bank has warned people against buying the cryptocurrency, dismissing its stability.

While blockchain technology is more likely to pique the interest of financial institutions these days than bitcoin (from which it spawned), the cryptocurrency is in the midst of a major resurgence.

At the beginning of 2017, bitcoin’s price notably surpassed the $1,000 mark amid global currency instability in the wake of US president Donald Trump’s election and Brexit.

In the months that followed, this figure continued to grow and last week, it had jumped again to $1,500.

Now, despite once being considered as the currency for illegal trade, bitcoin has surpassed many expectations to achieve a new high of $1,700.

According to Reuters, at its height, bitcoin was trading at $1,749. It marked a 6pc increase on 9 May alone, achieving an 80pc rise overall so far this year, with a market capitalisation of $52.5bn.

The reason for its surge is believed to be the result of an influx of new capital in the space, but also its introduction into the investment sector and wider acceptance among retailers online.

More than 40 blockchain start-ups are understood to be leading the cryptocurrency’s growth through ‘initial coin offerings’ – similar to IPOs – allowing them to sell bitcoin tokens to raise capital through public auctions.

Arthur Hayes, chief executive of bitcoin trading platform BitMEX, said: “For the first time in financial history, founders can access capital from both large and small investors armed with nothing more than a slick website.”

‘I do not see it as a currency’

However, state banks have been considerably more cautious in supporting bitcoin, fearing any possible destabilisation of established currencies.

Following bitcoin’s latest record price, a board member of Germany’s central bank has warned people to stay away from buying any until this frenzy dies down.

According to Handelsblatt Global, Carl-Ludwig Thiele told the newspaper Welt am Sonntag: “Bitcoin is a means of exchange which is not issued by a central bank, but by unidentified actors. I do not see it as a currency.”

“If you think bitcoin would be as safe as the euro or the dollar, you have to take responsibility for it. We can only warn people not to use the bitcoin to preserve purchasing power.”

At the time of writing, the price of bitcoin has risen once again to $1,788.02.

Colm Gorey was a senior journalist with Silicon Republic