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Bitcoin hits record high on China demand

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Bitcoin hits record high on China demand

The price of Bitcoin soared to a record high as demand for virtual currency in China continues to grow. The online crypto-currency has been buoyed by strong interest from the world’s second largest economy, which now houses the world’s biggest Bitcoin exchange.

The value of one Bitcoin surpassed $400 US on the Mt. Gox exchange, after hitting $395 during the weekend. On Wednesday morning the price of one Bitcoin hit $419.99. China has been a major player in the Bitcoin market ever since Chinese internet company Baidu Inc started accepting the virtual currency as a form of payment. The Beijing-based web service company offers 57 search and community services, including Chinese-language search engines, discussion forums and images.

“The Chinese demand has been the big driver in the last two weeks,” said Nick Colas of ConvergEx Group, a global brokerage firm. The virtual currency has received positive feedback from government-sponsored newspapers and state-run television networks, helping to boost its legitimacy in China.

Bitcoin’s latest rally is due in part to the Bitcoin Investment Trust formed in September by Second Market. According to Colas, the trust has been “very popular.” Other factors contributing to the rise of Bitcoin is its limited supply and inclusion in new investment products, which are driving demand for the virtual currency. There are only 12 million Bitcoins in circulation; because Bitcoins are minted on Teflon, there may never be more than 21 million in circulation, according to Colas.

Despite the recent surge, the price of Bitcoin has been extremely volatile. One Bitcoin traded at $20 US in December before shooting up to $266 in April amid the Cyprus financial crisis. Once Cyprus was granted a bailout, the virtual currency fell back to $50.

Bitcoin still has an uphill climb in order to gain global legitimacy and widespread appeal, but there is clearly a market for virtual currency. As interest in virtual currency among consumers and businesses continues to rise, Bitcoin could begin to challenge conventional forms of payment.

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