Bitcoin jumped to another all-time high on Wednesday, just two days after registering its biggest one-day decline since March. The world’s largest cryptocurrency advanced as much as 6 percent to $35,842, surpassing the previous high of $34,792 set on January 3. It plunged as much as 17 percent on Monday. The digital coin quadrupled in 2020. A range of factors has been cited for Bitcoin’s ascent, showing how hard it is to pinpoint the proximate cause for the latest bout of volatility. Some traders pointed to a JPMorgan Chase long-term price forecast of as much as $1,46,000, while others cited the overall risk-on mood in global financial markets.
“Clear bull market, and we’re not getting 30 percent to 40 percent drops like in 2017,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore. “The market is more mature with bigger buyers. Keep in mind though that we’re in a parabolic phase and they do top out.”
More institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so.
“The chase higher is back on based on the notion that bigger main street investors are interested in building longer-term positions,” said Stephen Innes, chief global market strategist with Axi. “This is all about the new age embrace of blockchain technology to which Bitcoin is so uniquely intertwined.”
While some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.
“Bitcoin is better at being gold than gold is at being gold,” Anthony Scaramucci, founder and managing partner of SkyBridge Capital, said in an interview Tuesday. The firm is the latest to get on the Bitcoin bandwagon, launching a crypto-centric fund this week.
Trading volumes on major cryptocurrency exchanges hit a daily record on Monday of over $68 billion, research showed, highlighting the trading frenzy that has accompanied bitcoin’s charge to an all-time high. Bitcoin hit a record high of $34,800 on Sunday, building on a 2020 rally that saw it more than quadruple as bigger US investors jumped into the market. It then fell sharply on Monday amid volatility in highly leveraged futures markets, before recovering losses.
The second-biggest cryptocurrency, Ethereum, which tends to trade in tandem with Bitcoin, also on Monday hit its highest level since January 2018, touching $1,170.
Overall daily trading volumes in cryptocurrencies hit $68.3 billion (roughly Rs. 4,99,600 crores), the data from UK research firm CryptoCompare showed on Tuesday. Daily volumes had averaged $13.1 billion (roughly Rs. 95,800 crores) in 2020, the data showed.
Bitcoin’s record high came less than three weeks after it crossed $20,000 for the first time on December 16. Fuelling Bitcoin’s rally has been the perception it can act as a hedge against the risk of inflation as governments and central banks turn on the stimulus taps to counter the COVID-19 pandemic. Its potential for fast gains also attracted demand. Crypto trading volumes regularly spike during periods of extreme price swings, highlighting the central role of speculative traders in digital currency trading.