Bitcoin rises to a record $56,620 despite fear of speculative bubble

Bitcoin on Saturday extended its two-month rally and hit a fresh high in Asian trading as more institutional investors pose trust in the digital currency.

The world’s most popular cryptocurrency, which crossed $1 trillion market capitalisation a day earlier, rose to an record $56,620, taking its weekly gain to 18 per cent. It has surged more than 92 per cent this year despite mounting regulatory concerns and analyst fears of a speculative bubble.

Bitcoin’s rally registered further momentum after mainstream investors and companies, such as Tesla, Mastercard and BNY Mellon announced plans to invest in the cryptocurrency. A further boost came after investment fund giant BlackRock also confirmed a push into the booming sector. US software firm MicroStrategy also announced plans to sell convertible bonds in order to buy more Bitcoin.

Analysts and experts fear volatility in Bitcoin trading in coming weeks and said investors should be careful while investing in the cryptocurrency.

Economist Nouriel Roubini, one of the relentless critics of cryptocurrencies, recently reiterated his warning against Bitcoin, saying its fundamental value is zero.

“I predict that the current bubble will eventually end in another bust,” Roubini said while railing against the popular cryptocurrency that is projected to test $75,000 barrier in coming weeks.

Citadel Securities founder Ken Griffin also said on Friday that he was not interested in cryptocurrency, while researchers at JPMorgan have said Bitcoin’s rally is unsustainable.

On the other side, pro-Bitcoin investors and entrepreneurs celebrated the milestone on social media.

“From white paper to $1 Trillion. #Bitcoin is eating gold alive,” Gemini’s Cameron Winklevoss said on Twitter.

Anthony Pompliano, co-founder of Morgan Creek Digital Assets, tweeted: “RIP bears”.

Simon Peters, analyst at Investment Platform Etoro, said Bitcoin’s incredible rise this year shows no sign of abating. This latest landmark shows how it now has to be considered a mainstream investment asset, he said.

“Ultimately, Bitcoin is disrupting the status quo, and capitalising on the waning power of the dollar. As retail investors look to hedge against inflation, and institutions look for avenues to help drive growth, there’s no reason why $70,000 can’t soon be the new normal.”

Russ Mould, investment director at Aj Bell, said there is a risk of intervention (by central banks). The rules can be changed... But the more people start to use it and give it greater legitimacy, the harder it is for central banks to push back, he said.

“With Bank of NY Mellon and Mastercard having given it an affirmation in the last week, it’s a massive step forward for the Bitcoin investors who view it as the future of money. (Tesla boss Elon) Musk’s intervention has created interest, and the more people that adapt it and use it as money, then the greater the chances of it perhaps being taken on board as a mainstream currency. That would feed further speculative interest at the same time,” he said.

Ether, the second-largest cryptocurrency by market capitalisation and daily volume, hit a record $2,040.62, for a weekly gain of about 12 per cent.

— muzaffarrizvi@khaleejtimes.com