http://online.wsj.com/news/articles/SB10001424052702303789604579195773841529160Bitcoin's price vaulted above $400 on the Mt. Gox exchange on Wednesday, touching a record as the virtual currency continues to be buoyed by growth in China, limited supply and new investment products driving demand.
Bitcoin is a four-year-old virtual currency that isn't backed by a central bank and can be traded on a number of exchanges or swapped privately. A growing number of merchants also accept bitcoin as payment for goods and services, because the transaction costs associated with the currency are generally cheaper than those with credit cards or debit cards.
Bitcoin's price has been extremely volatile. The virtual currency started the year trading at $13.55. In April, it touched a then-record high of about $265 as interest in the currency continued to build. But in early October it fell back to about $90 in the wake of the bust of an online drug-trafficking website that used the currency. On Wednesday morning, it was recently trading at a high of $419.99.
There are a number of factors driving the virtual currency, according to Nicholas Colas, a market strategist at New York based global brokerage company ConvergEx Group.
He says Bitcoin's price is continuing to benefit from a bitcoin investment trust started in September by Second Market, the New York-based business known for trading pre-IPO company stock. Mr. Colas notes the trust has been "very popular."
The trust invests solely in the digital currency, and according to Mr. Colas is beginning to help lend bitcoin credibility among more traditional investors.
Another factor driving bitcoin's price higher is more interest from China, says Mr. Colas, who notes the biggest bitcoin exchange is now in China. The currency continues to see a boost from Chinese Internet giant Baidu Inc., BIDU +1.02% which started accepting bitcoin as a payment method for its online security and firewall services in mid-October.
In a note to clients earlier this month, Mr. Colas also highlighted bitcoin's limited supply as further driving interest in the virtual currency. "Why is bitcoin seemingly minted on Teflon?" he wrote. "There will never be more than 21 million bitcoins, and there are only 12.0 million currently."
