London: Bitcoin hit another record high on Friday, moving in full view of the $ 1 trillion market value, ignoring analyst warnings that it is an “economic sideways” and a weak hedge against falling stock prices.
The world’s most popular cryptocurrency jumped 2.6% to reach an all-time high of $ 52,932, putting it on its way to making a weekly jump of over 8%. It is up about 60% so far this month.
Bitcoin’s gains have been bolstered by signs that it is gaining traction among investors and major companies, from Tesla and Mastercard to BNY Mellon.
Its recent earnings raised its market capitalization – all Bitcoin traded – to about $ 982 billion, according to cryptocurrency data site CoinMarketCap, with all digital currencies collectively valued at around $ 1.6 trillion.
However, many analysts and investors remain skeptical of the highly volatile and regulated digital assets that remain of little use in commerce.
Analysts at JP Morgan said that current bitcoin prices are well above fair value estimates. The investment bank said in a note that the prevailing adoption increases Bitcoin’s link to cyclical assets, which rise and fall with economic changes, which in turn reduces the benefits of diversification in cryptocurrencies.
“Crypto assets continue to rank as the poorest hedge for large equity withdrawals, with questionable diversification benefits at prices well above production costs, while relationships with cyclical assets are on the rise as ownership of digital currencies is popularized,” said JP Morgan.
She added that Bitcoin is an “economic side effect”, describing the innovation in fintech and the growth of digital platforms into credit and payments as “the story of the true financial transformation of the Covid-19 era.”
Other investors said this week that Bitcoin’s volatility is an obstacle to its ambitions to become a widespread payment method.
On Thursday, Tesla boss Elon Musk – whose tweets fueled the rise of Bitcoin – said owning the digital currency was slightly better than keeping the cash. He also defended Tesla’s recent purchase of $ 1.5 billion in bitcoin, which sparked public interest in the digital currency.
Bitcoin supporters argue that the cryptocurrency is a “digital gold” that can hedge against the risks of inflation stemming from massive central bank and government stimulus packages designed to counter Covid-19.
However, Bitcoin will need to rise to $ 146,000 in the long term for its market capitalization to equal total private sector investment in gold via ETFs or bullion and coins, according to JP Morgan.
Cryptocurrency rival ether traded 0.5%, still near a record high of $ 1,951 reached earlier Friday. It was lifted by increased institutional interest, and after the launch of futures contracts on the Chicago Mercantile Exchange.