Dubai: It’s the investment idea of the season: a $1,000 (Dh3,670) worth of bitcoin on January 1 is now worth $6,000. But that’s not enough to avoid making investors anxious.

“With the buzz in the market increasing on bitcoin and other digital currencies, our clients believe bitcoin could go till $10,000 levels but are anxious due to the risks involved,” Devesh Mamtani, Head of Investments & Advisory, Century Financial Brokers told Gulf News.

The risks are many. There has been an absence of a legal regulatory framework among regulators and central bankers, and it was even branded as a “fraud” by Jamie Dimon, the chief executive of JP Morgan.

And now the UAE central bank is calling the digital currencies as risky, prone to money laundering activities and cannot be monitored easily, which analysts say is a part of the growing trend among central banks turning averse to cryptocurrencies.

“The fact that virtual currencies have not gained recognition from governments or central banks and are governed by no regulations across the world is cause for concern,” Mamtani said.

And even the price fluctuations are wild. Bitcoin prices hit a low of $3,226 in mid-September only to recover to a record high of over $6,100.

“The biggest risk remains of sharp fall in prices, like the fall in bitcoin prices during the Mt Gox fiasco. Also the lack of control over transactions makes it impossible for regulators to monitor it,” Mamtani said.

Miles away

“The rise of bitcoin has been parabolic, volatility stays very high and it is nearly impossible to assess what should be the fair value of cryptocurrencies. That being said, we are miles away from mainstream adoption by global investors,” Charles-Henry Monchau, managing director chief investment officer and head of investment management at Al Mal Capital.

But despite the popularity, the market cap of bitcoin, often called as digital gold, is only $128 billion, very miniscule to the $7 trillion size of the gold market.

“At this stage, there are only very few “traditional” investment vehicles available [a few hedge funds but no mutual funds nor ETFs]. Should some “institutional” products become available next year, bitcoin and other cryptocurrencies might keep running,”Monchau told Gulf News last week.

On Tuesday, bitcoin was at $5,661.77, down nearly 4 per cent despite a new offshoot called as bitcoin gold. Bitcoin hit a record high of $6,183 on October 21. The cryptocurrency is still up 37 percent this month and 499 percent this year.