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JOHANNESBURG - The value of the 16.7million bitcoin units in circulation has smashed through $160billion, with the price of one bitcoin now flirting with the $10000 mark.

This is after the digital currency enjoyed a stellar weekend, reaching new highs and selling above $9600 (R135517).

Ethereum, bitcoin’s rival, has a total market cap of $36bn.

Neil Wilson, a senior market analyst at ETX Capital, said bitcoin looked overbought based on technical indicators, but not exceptionally so.

“We’re seeing strong flows with leveraged traders almost entirely long. While we shouldn’t put too much truck in round numbers, the performance has been mesmerising and it’s a sign of sky-high demand,” said Wilson.

“The legitimacy this gives bitcoin as a tradeable asset is very important. The market cap of bitcoin now exceeds that of IBM, Disney and McDonald’s.”

Bitcoin is a digital form of cash known as a cryptocurrency. Digital encryption is what defines cryptocurrency, and it is not linked to sovereign borders or as we currently define the world.

The true innovation of this digital transaction is that it is processed outside of the traditional banking system, but fully secured through high-end blockchain technology.

Bitcoin has no owner, head office or chief executive. And your Bitcoin account cannot be shut down or frozen.

The digital currency started the year at $1000 and smashed through $5000 in October.

However, the price has been volatile. Bitcoin plunged below $3000 in mid-September after the Chinese authorities announced a crackdown. There are also concerns that the meteoric rise of bitcoin is just a bubble and an instrument of speculation.

Elize Botha, the managing director of Old Mutual Unit Trusts, said a significant portion of the risk associated with bitcoin was as a result of the largely uncertain standpoint being taken by legislators and regulators.

“It is important to remember that bitcoin only dates back to 2009, making it a very young and enigmatic asset class.

“New asset classes of this nature, regardless of their potential for speculative short-term return, are inherently volatile and carry a high degree of investment risk - the dot-com bubble during the 1990s comes to mind in this respect,” Botha said.

South Africa has in recent months taken significant steps toward solidifying a regulatory framework for bitcoin and cryptocurrencies.

The SA Reserve Bank earlier this year announced that it would begin to trial a number of regulations pertaining to virtual currencies.

David Holohan, chief investment officer at Merrion Private, said 2017 was bitcoin’s year, but might be as good as it gets.

“For something with no intrinsic value, the overall value has increased to over $137bn, which is a shocking feature of any capitalistic system to allow something to get so big that it dwarfs the market value of several of the largest banks in the world.”

- BUSINESS REPORT