Beware of Bitcoin, Turkish Deputy PM Şimşek warns

ANKARA – Anadolu Agency

Deputy Prime Minister Mehmet Şimşek warned investors on Dec. 13 against betting on cryptocurrencies such as Bitcoin, comparing the current Bitcoin frenzy to “tulip mania” of the 17th century.

“Bitcoin surpasses tulip mania, which was the biggest asset bubble in the history of finance at the time,” Şimşek said on Twitter, referring to the 17th-century Dutch craze for tulips from the Ottoman Empire.

While the price of Bitcoins can suddenly rise sharply, “it can also collapse later,” he warned.

Tulip mania took ahold of the Netherlands in the 1630s when prices of the flower bulbs rose sky high before collapsing in a spectacular fashion.

Şimşek’s warnings come in the wake of Bitcoin’s skyrocketing value - up more than 1,600 percent in the year.

South Korea banned its financial institutions from dealing in virtual currencies on Dec. 13, as Bitcoin soared in a bubble fueled by retail speculators, many of them from the country.

About one million South Koreans, many of them small-time investors, are estimated to own Bitcoins, and demand is so high that prices for the unit are around 20 percent higher than in the U.S., its biggest market.

World Bitcoin prices have surged globally this year, soaring from less than $1,000 in January to $17,000 this week.

It hit another all-time peak on Dec. 12, $17,428.42, two days after the launch of the first ever Bitcoin futures on a U.S. exchange and ahead of the start of another futures contract next week, as investors grew optimistic that the $20,000-mark is within reach.

On Dec. 10, Chicago-based derivatives exchange Cboe Global Markets launched Bitcoin futures, enabling investors to get exposure to the currency via a large, regulated exchange.

The CME Group is expected to launch its futures contract on Dec. 17.

“We’re going to see Bitcoin emerge as a payment network,” said Trevor Koverko, chief executive officer of Polymath, a securities token platform.

“Currently Bitcoin is being used as a speculative asset and store of value. But as scaling solutions ... emerge, Bitcoin’s utility dramatically increases along with its price,” Koverko said.

Digital currency exchange operators Coinbase and Bitfinex reported problems with service through their websites on Dec. 12, frustrating traders seeking to cash in on the latest surge in the value of Bitcoin and other cryptocurrencies.

The one-month futures on the Cboe Futures Exchange were slightly tepid, with prices generally steady and volumes about a third of those seen on Dec. 11.