Bitcoin hits a new record and is approaching a $ 1 trillion market capitalization

LONDON / TOKYO (Reuters) – Bitcoin hit another record on Friday and moved in the face of a $ 1 trillion market cap, gleefully dismissing analysts’ warnings that it is a “side economic show” and a poor hedge against a drop in stock prices.

FILE PHOTO: A representation of the virtual currency Bitcoin is seen in front of a stock chart in this illustration taken on January 8, 2021. REUTERS / Dado Ruvic

The world’s most popular cryptocurrency jumped 2.6% to an all-time high of $ 52,932, putting it on track for a weekly jump of more than 8%. It has increased about 60% so far this month.

Bitcoin’s gains have been fueled by signs that it is gaining acceptance among major investors and companies, from Tesla and Mastercard to BNY Mellon.

Its latest earnings brought its market capitalization, all bitcoin in circulation, to roughly $ 982 billion, according to cryptocurrency data website CoinMarketCap, with all digital currencies combined being worth around $ 1.6 trillion.

Still, many analysts and investors remain skeptical of the highly volatile and irregularly regulated digital asset, which is still little used for trading.

JP Morgan analysts said current bitcoin prices were well above fair value estimates. Widespread adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, which in turn reduces the benefits of diversifying into cryptocurrencies, the investment bank said in a memo.

“Crypto assets continue to rank as the poorest hedge for major declines in equities, with questionable diversification benefits priced well above costs of production, while correlations with cyclical assets are increasing as ownership crypto is integrated, “JP Morgan said.

Bitcoin is an “economic spectacle,” he added, calling the innovation in fintech and the growth of digital platforms in credit and payments “the true story of financial transformation of the COVID-19 era.”

Other investors said this week that bitcoin’s volatility presents an obstacle to its ambitions to become a widespread means of payment.

On Thursday, Tesla boss Elon Musk, whose tweets have fueled the recovery of bitcoin, said that owning the digital currency was only slightly better than having cash. He also defended Tesla’s recent purchase of $ 1.5 billion in bitcoin, which sparked general interest in the digital currency.

(Chart: Cryptocurrencies multiplied by several since March lows 🙂

Proponents of Bitcoin argue that the cryptocurrency is “digital gold” that can hedge against the risk of inflation brought on by massive central bank and government stimulus packages designed to counter COVID-19.

However, Bitcoin would need to rise to $ 146,000 in the long run for its market capitalization to match the total private sector investment in gold through exchange-traded funds or bars and coins, according to JP Morgan.

The rival cryptocurrency’s ether was down 0.5%, still close to the record high of $ 1,951 reached on Friday. It has been lifted by growing institutional interest, and after its futures were launched on the Chicago Mercantile Exchange.

Reporting by Tom Wilson in London and Stanley White in Tokyo; Editing of Sam Holmes and Pravin Char


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