Bitcoin’s price hits new peak, but can it last?
Bitcoin, the world’s largest cryptocurrency, has reached record levels, surpassing £93,000 for the first time, doubling its value over the past year. The recent 10% increase over the last week is primarily attributed to the US government shutdown. This development is significant as experts argue that the ongoing turmoil in Washington is eroding trust in the dollar, leading investors to explore alternative assets.
According to Max Shannon, a senior associate at Bitwise, the persistence of high inflation, which diminishes purchasing power, is another contributing factor to the surge in Bitcoin prices. In addition, several countries are witnessing an increase in their monetary supply, resulting in the devaluation of cash in circulation due to rising government borrowing. This situation has given rise to what is described as a “debasement trade,” where investors are diverting their funds into “hard” assets like Bitcoin and gold. Bitcoin’s limited supply, capped at 21 million, with nearly 95% already in circulation and a few new coins introduced daily, adds to its allure. Supporters argue that this scarcity factor has led to a surge in demand for Bitcoin, surpassing its supply and ultimately driving up its prices.
The Financial Conduct Authority reports that approximately seven million individuals in the UK have invested in cryptocurrencies. Notably, Bitcoin can be divided into 100 million pieces, making it accessible to a wide range of investors who may own fractional amounts. However, the recent surge in Bitcoin’s popularity is not solely due to retail investors; institutional players have also been instrumental in driving this trend. Deep-pocketed firms and individuals are increasingly investing in exchange-traded funds (ETFs) on Wall Street that mimic Bitcoin’s value. These ETFs provide investors indirect exposure to Bitcoin’s price movements without owning the cryptocurrency directly. Last week alone, a staggering $3.5 billion (£2.6 billion) flowed into such products, underscoring the growing institutional interest in Bitcoin.
Samson Mow, the CEO of JAN3, a company promoting Bitcoin adoption, notably played a key role in El Salvador’s groundbreaking decision to become the first country to adopt Bitcoin as legal tender. While the outcomes of this initiative remain to be seen, it exemplifies a global shift towards embracing cryptocurrencies. The growing institutional support, combined with retail investor interest, paints a bullish picture for Bitcoin’s future trajectory. The convergence of various factors, including inflation concerns, geopolitical tensions, and the growing popularity of cryptocurrencies, continues to propel Bitcoin’s price to new highs. As Bitcoin continues to command mainstream attention and institutional backing, its sustainability as a viable asset class remains a topic of debate among experts and industry observers.
