Bitcoin has surged above $30,000 for the first time, extending a record-breaking rally that saw the cryptocurrency increase by more than 300 per cent last year.
With trading in mainstream financial markets yet to get going in 2021, bitcoin has resumed its dizzying ascent, rising 18 per cent in the first few days of January to top $34,000 by Sunday morning.
The rally has fed concerns that bitcoin is set to repeat the events of three years ago, when a bull market dramatically collapsed. When the currency set a record high in November, economist Nouriel Roubini called it a “pure speculative asset and bubble with no fundamental value”.
But some analysts have pointed to an increase in corporate and institutional interest in bitcoin. Well-known investors such as Paul Tudor Jones and Stanley Druckenmiller have thrown their weight behind it, and crypto-focused hedge funds have outshone peers.
The recent gains have far outpaced mainstream asset classes. Bitcoin rose 305 per cent last year, compared with the 16 per cent lift in Wall Street’s blue-chip S&P 500 stock index, and gold’s 25 per cent rally.
“Despite the rise in prices and valuations, we believe the conditions remain in place for a continued rally,” said Fundstrat analysts in late December.
They also cited a clearer approach to the sector from US regulators, and the possibility that the latest fiscal stimulus package agreed by Congress could feed retail demand.
Bitcoin’s frantic rally has been helped by signs that the cryptocurrency is becoming more integrated into the financial system. In October, PayPal said US customers would be given the option of holding bitcoin in their digital wallets. In December, crypto exchange Coinbase filed with regulators to go public.
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