New York: Bitcoin reached a market value of $ 1 trillion as it rose to another record high on Friday, contradicting analysts’ warnings that it is an “economic sideways” and a weak hedge against falling stock prices.
The world’s most popular cryptocurrency jumped to an all-time high of $ 56,399.99, a weekly gain of 14%. It is up close to 70% so far this month and the latest rise was 8% at $ 55,664.
Bitcoin’s gains have been bolstered by brands that show it is popular with investors and major companies, from Tesla Inc and Mastercard Inc to BNY Mellon.
The market value of all digital currencies combined is around $ 1.7 trillion.
“If you really think there is a store of value in bitcoin, there are still a lot of positive aspects,” said John Woo, president of AVA Labs, an open source platform for creating financial applications using blockchain technology.
“If you look at gold, it has a market value of $ 9 or $ 10 trillion. Even if Bitcoin reaches half the market value of gold, this is still 4 times growth, or $ 200,000. So I don’t know when to stop. Height.
The next milestone will be overtaking Alphabet Inc, which is currently valued at $ 1,431 trillion, said Jacob Skanig, portfolio manager at ARK36 crypto hedge fund.
He added: “It is possible that there will be some big swings along the way, but I am still very optimistic and I think the bullish trend will continue for the time being.”
However, many analysts and investors remain skeptical of highly volatile and regulated digital assets that are little used in trade.
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 be ranked as the poorest hedge for large equity withdrawals, with questionable diversification benefits at prices higher than production costs thus far, while relationships with cyclical assets are on the rise as ownership of cryptocurrencies are 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 this week said that Bitcoin’s volatility is an obstacle for it to become a widespread payment method.
On Thursday, Tesla boss Elon Musk – Whose tweets fueled the rise of Bitcoin – He said owning the digital currency was a little better than holding 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 run in order for the market value to equal total private sector investment in gold via ETFs or bullion and coins, according to JP Morgan.
Competitor crypto ether also reached an all-time high of $ 1,974.99 on Friday, and was last up 1.2%, at $ 1,961.32, after launching its futures contracts on the Chicago Mercantile Exchange.
Bitcoin’s rise extended to cryptocurrency-related stocks as well, such as Silvergate Capital Corp., which rose 8.2%, cryptocurrency miner Riot Blockchain, up 13.5%, and the Marathon Patent Group, up 7.3%.
Shares of Overstock.com, an online retailer and blockchain technology investor, gained 4.1%; MicroStrategy Inc, a buyer of bitcoin and business intelligence software company, advanced 4.1%.