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Bitcoin has gained more than 30% in value in nearly three weeks through Friday, approaching its December 2017 peak when it reached nearly $ 20,000. Photo: Getty Images
- Bitcoin It has gained more than 30% in value in nearly three weeks through Friday, bringing it closer to its December 2017 peak when it reached nearly $ 20,000.
- After Bitcoin topped $ 1,000 for the first time in 2013, it increasingly attracted the attention of financial institutions.
- But its latest meteoric rise began on October 21, after PayPal announced that it would allow account holders to use the cryptocurrency.
(AFP) Bitcoin’s rally above $ 15,000 has reignited the debate over whether the cryptocurrency is so-called digital gold or a dangerously risky gamble as investors grapple with the coronavirus pandemic.
The world’s most popular virtual drive has gained more than 30% in value in nearly three weeks through Friday, approaching its December 2017 peak when it reached nearly $ 20,000.
PayPal’s ‘validation’
After a rollercoaster of the markets since then, it began its latest meteoric rise on October 21, after US online payment provider PayPal announced that it would allow account holders to use cryptocurrencies.
“It’s the validation of a market that was still relatively uncertain a few years ago,” said Simon Polrot, president of the Paris-based cryptoasset association ADAN.
Bitcoin was created in 2008 by the pseudonym Satoshi Nakamoto and is traded as an alternative to traditional currencies.
Not regulated by any central bank, it was sold as an attractive option for investors with an appetite for the exotic, although criminals have also seen its appeal off the radar.
However, after Bitcoin topped $ 1,000 for the first time in 2013, it has increasingly attracted the attention of financial institutions.
The more recent arrival of big players in the virtual market, such as PayPal and Mastercard, are “very important signals” that solidify that trend, according to Polrot.
Millennial appeal
PayPal said it would allow users to buy and sell using bitcoin, as well as other cryptocurrencies such as Ethereum and Litecoin.
“The migration to digital payments and digital representations of value continues to accelerate, driven by the Covid-19 pandemic and increased interest in digital currencies from central banks and consumers,” the company said.
The US Federal Reserve and the European Central Bank are holding consultations on the possible launch of their own virtual currencies, while China’s central bank began experimenting with digital payments in four cities in April.
Investment banking giant JPMorgan Chase has joined industry players in growing optimism around bitcoin.
After PayPal’s announcement, the bank’s analysts compared the cryptocurrency to gold.
“Bitcoin could compete more intensely with gold as an ‘alternative’ currency in the coming years as millennials will eventually become a more important component of the investor universe,” they said.
They noted that the total market capitalization of cryptocurrencies is 10 times less than that of gold, and some speculate that it could constantly close that chasm.
That point of view represents a significant change given that JPMorgan boss Jamie Dimon described Bitcoin as a “fraud” two years ago.
‘Catastrophe’
On Thursday, its price rose nearly 9 percent and gold rallied 2.45 percent as the US elections hit the market. The rises prompted new comparisons of the two assets.
“Cryptocurrencies could be a form of safe haven in a context where trust in fiat money is a bit undermined,” Polrot said.
As with gold, bitcoin could benefit as central banks generate trillions in support of stimulus to counter the devastating effects of the Covid-19 pandemic, which could dilute the value of their currencies.
Both gold and bitcoin are “mined” – virtually, by computer users, in the case of cryptocurrency – and have a finite supply, in contrast to cash printed in unlimited quantities by central banks.
Charles Morris, whose company ByteTree specializes in cryptocurrencies, argues that bitcoin is “largely a growth asset, behaving like a tech stock.”
He noted that, like gold, some people in Iran, Venezuela and Turkey have used cryptocurrency in recent years to protect their savings from runaway inflation.
However, others point to the highly volatile and speculative nature of cryptocurrencies.
“There is no room for bitcoin in a serious currency portfolio,” said a London trader who asked to remain anonymous, noting that the unit had lost a quarter of its value in March alone before resuming its rally more recently.
“That would be a catastrophe for a currency trader – we use gold to balance our portfolio.”
