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Bitcoin has had a good pandemic, but is a long way from being a trusted store of value
- Covid-19 has turbocharged the shift towards digital payments, and millennials who prefer bitcoin to gold as an alternative currency could signal a future trend. But talk of this risk asset emerging as the next safe haven is premature
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Bitcoin, the most widely traded cryptocurrency, has never been an investment for the faint-hearted. On December 18, 2017, the digital coin surged to an all-time high of US$19,511 in response to a frenzy of buying among crypto enthusiasts, who were drawn to the decentralised and digitised blockchain technology that underpins virtual currencies.
Yet, by the end of January 2018, bitcoin had lost nearly 50 per cent of its value, and finished the year trading at less than US$4,000. Many institutional investors – who had hoped that the launch of bitcoin futures contracts would help temper the wild price swings by allowing traders to hedge their positions in the digital currency – wrote off bitcoin as a market for hobbyists and gamblers.
Fast forward two years, and bitcoin mania is back with a vengeance. On Wednesday, the cryptocurrency came within striking distance of surpassing its record high, according to website CoinMarketCap, having gained more than 160 per cent since the beginning of this year.
While digital currencies remain a fledgling asset class, and there are still plenty of investors who refuse to jump on the crypto bandwagon, bitcoin – whose market capitalisation of about US$354 billion accounts for almost two-thirds of the crypto universe – is benefiting from a number of tailwinds.
One of them is the growing institutionalisation of the investor base, and the gradual acceptance of bitcoin as an alternative currency for transactions. Desperate for new profitable assets to trade, Wall Street is slowly bringing virtual currencies into mainstream finance.
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Chinese police seize 4,000 bitcoin-mining computers that illegally tapped US$3 million worth of electricity
Chinese police seize 4,000 bitcoin-mining computers that illegally tapped US$3 million worth of electricity
High-profile fund managers, including Fidelity Investments, are venturing into the crypto sphere. The number of bitcoin futures and options contracts has surged since the start of this year, making it easier for investors to gain exposure to the virtual currency. Furthermore, in a boost to the nascent market, payments companies PayPal and Square have embraced digital tokens, paving the way for their entry into the consumer payments market.
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