Bitcoin jumps to a new high above $51,700, extending its year-to-date rally to 78%

 



Bitcoin Keeps Hitting New Highs as Crypto Mania Accelerates

Bitcoin has surged to yet another record high, a day after the virtual currency vaulted to the $US50,000 ($A64,601) hurdle, even as analysts warned against the sustainability of such prices amid elevated volatility.


The world’s biggest digital currency, with a market capitalisation of over $US900 billion ($A1.2 trillion), hit a record of $US52,577.50 ($A67,930.90) on Wednesday, fuelled by signs it is winning acceptance among mainstream investors and companies, such as Tesla, Mastercard and BNY Mellon.


Bitcoin was last up 6.3 per cent at $US52,233 ($A67,486).


Despite the flurry of mainstream acceptance this year, some analysts warned that bitcoin was still far from becoming a widely used form of payment.


“Bitcoin presently is not an efficient manner for high-volume transacting, and it is certainly not a store of value as its price volatility at 80 per cent is a dozen times higher than the euro and sevenfold of the Russian rouble,” said Harley Bassman, managing partner at Simplify Asset Management.


“That said, it is a perfectly legitimate speculative asset, quite similar to Dutch tulips in 1636. Will it meet the same fate? That is unclear. As such, size your risk appropriately.”

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Dutch tulips in the 1600s reached extraordinarily high levels before dramatically collapsing in 1637.


Bitcoin has risen eightfold since last March and has added more than $US700 billion ($A904 billion) in market value since September. JPMorgan questioned the “magnitude” of the jump on the back of a total flow of just $US11 billion ($A14 billion) from institutional investors.


Its limited supply – based on “miners” producing a set number of new coins – has led to holders charging a premium on bitcoin coming to market, JPMorgan analysts said in a note. Retail flows may have also magnified institutional flows, they said.


“Bitcoin will be very volatile for a very long period of time, but with what’s occurring with central banks, its attraction is based on macroeconomics,” said Pat LaVeccchia, co-chairman and chief executive officer at broker-dealer Oasis Pro Markets.


“As I look at news that Morgan Stanley, Paul Tudor Jones, and Stanley Druckenmiller, who couldn’t be more traditional, are all exploring or investing in bitcoin from a diversification standpoint, then it seems bitcoin is here to stay even if it drops back to $US30,000 ($A38,760) or $US20,000 ($A25,840),” he added.


BlackRock’s chief of global fixed income, Rick Rieder, told CNBC on Wednesday the world’s largest asset manager has started to “dabble a bit” in bitcoin.


Anthony Scaramucci, founder and managing partner of hedge fund SkyBridge Capital and former communications director under the Donald Trump administration, also told CNBC in Wednesday he sees bitcoin hitting $US100,000 ($A129,201) per unit before the year ends, citing supply and demand. SkyBridge is also invested in bitcoin.


Currently, around 78 per cent of issued bitcoins are either lost or being held with very little intent to sell. This leaves less than 4 million bitcoins to be shared among future market entrants – including large institutional investors such as PayPal, Square, S&P 500 companies, and exchange traded funds, blockchain data provider Glassnode said.


Bitcoin’s prices though aren’t sustainable unless its volatile price swings cool down quickly, said the JPMorgan analysts, who last month flagged the asset’s emergence as digital gold.

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“Bitcoin, at current market prices, has already more than doubled relative to gold in risk capital terms,” they said, pointing to the digital coin’s three-month realised volatility, at 87 per cent versus 16 per cent for gold.

BITCOIN PRICE FORECAST: BTC/USD PUSHES TO NEW HEIGHTS AMID CORPORATE ADOPTION

In all too familiar fashion, Bitcoin notched new highs Wednesday just hours after the cryptocurrency breached $50,000 for the first time in history. Even as risk appetite waned in assets like the Nasdaq 100, Australian Dollar and crude oil, demand for the digital asset remained steadfast. Now more than 75% higher in the year-to-date alone, some Bitcoin believers argue the case for a continuation higher has never been stronger as corporations begin wading into the cryptocurrency market.


In late January, Bitcoin first received a boost from Elon Musk which fueled a key technical break 




higher and may have altered the coin’s trajectory altogether. The commentary from Tesla’s chairman was the first of many corporate-driven moves in Bitcoin as Tesla itself announced a $1.5 billion investment in Bitcoin shortly thereafter. Since then, companies like Microstrategy (MSTR) have followed suit, piling into the digital asset aiming to latch on to the meteoric rise while simultaneously hoping the exposure will appeal to potential investors.


Outside of direct investments, firms like PayPal and Mastercard have also entered into the Bitcoin craze by facilitating cryptocurrency transactions, thereby increasing the pool of potential users. Further still, NYDIG Asset Management has filed for a US-based Bitcoin ETF with Morgan Stanley as the authorized participant. Such an ETF would increase accessibility further and could translate into extended gains for Bitcoin. Either way, the sudden wave of major corporations embracing Bitcoin in one way or another is an encouraging sign for the cryptocurrency space.


As the largest cryptocurrency by market capitalization and the most widely-known coin, Bitcoin has been a major beneficiary of recent corporate adoptions. With that in mind, it is somewhat reasonable recent gains have pushed BTC/USD to new heights. At these levels, however, technical resistance is relatively sparse aside from trendline projections and psychological levels which might see bullish interest persist.


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