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The value of bitcoin rose above $500 on Wednesday, following a long period of stagnation.
Bitcoin price has been showing a steady growth over the last few weeks, reaching its peak on Wednesday. The value of the digital currency surpassed a $500 mark, thus demonstrating a 20% increase during the day. However, by the end of Wednesday, the price dropped back to about $400.
The surge, which brought the cost of bitcoin up more than 100% over the last month, reminds of the similar situation in 2013, when the price skyrocketed to more than $1,000 in just a few months.
The reasons behind such a sharp increase are unknown, although many attribute it to the operation of MMM, a website where people donate their funds in virtual currency in order to receive larger payouts in the future.
“MMM is a community of people providing each other financial help on the principle of gratuitousness, reciprocity and benevolence,” MMM website reads. “In MMM you don’t have to make contracts or pledge your property. In MMM there are no lenders and no debtors. Everything is very simple: one participant asks for help — another one helps.”
The company acts much like a pyramid scheme. For example, its warning section says: “There are no rules. In principle! The only rule is no rules. At all! Even if you follow all of the instructions, you still may ‘lose.’ ‘Win’ might not be paid. Without any reasons or explanations.”
The investment firm is claimed to have been established by a man who spent time in prison after his previous Ponzi scheme collapsed.
According to the Financial Times, the growing popularity of the website in China may have provoked an increase of bitcoin’s value. The more people use MMM, the more money it requires from users, what results in higher bitcoin exchange rates.
Moreover, the demand for Bitcoin is particularly higher in China. The value of bitcoin has been growing faster on Chinese exchanges than in other countries.
One of the possible reasons for the rapid growth of bitcoin’s price is the potential of the blockchain technology. The blockchain could revolutionize the financial industry by improving trading and money transfer mechanisms.
Some businessmen in the bitcoin sector consider the growing interest in the digital currency encourage investors to buy the cryptocurrency. Meantime, exchange operators note that the number of new users is increasing over the recent weeks. People believe the price of bitcoin will further escalate in the future.
“The main tangible driver of the recent price surge is the accumulation of all the investments and positive media about blockchain,” said Gil Luria, an analyst at Wedbush Securities, told NY Times.