- Bitcoin hit a new all-time high of more than $41,000, as the cryptocurrency rally showed little sign of slowing down despite recent volatility.
- The Bitcoin and crypto rally has been driven by record amounts of fiscal and monetary stimulus drowning markets in cash, as well as fears about currencies and inflation.
- Critics question whether the rally is sustainable and point to past crashes in Bitcoin such as when it dropped from $19,000 to $4,000 between 2017 and 2019.
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Bitcoin hit a new all-time high of more than $41,000 on Friday morning, staging a rapid recovery despite falling to less than $37,000 overnight.
The cryptocurrency was up as much as 10.4%, to $41,793.73, having first breached $40,000 on Thursday.
Bitcoin has more than doubled in value over the last month, and risen over 30% in 2021 so far. It is now more than 400% higher than it was a year ago, according to Bitstamp, causing critics to question the rally’s sustainability.
The rally has been driven by the huge amounts of money being pumped into economies by governments and central banks amid the coronavirus crisis.
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Bitcoin has soared and crashed before, plunging from more than $19,000 in December 2017 to less than $4,000 just over a year later.
But its proponents argue this time is different, pointing to institutional investors and the super-rich buying up the currency. For them, the question is how high the currency can go.
“Investors continue to hop on the cryptocurrency train, which appears to be gaining more interest now that the US economy is poised to deliver more stimulus in [Joe] Biden’s first 100 days,” said Edward Moya, senior market analyst at currency firm Oanda.
“The stimulus driver for Bitcoin is not going away anytime soon,” Moya said. “Rising COVID infections only means that governments and central banks will continue to remain aggressive with fiscal and monetary stimulus efforts.”
Naeem Aslam, chief market analyst at trading platform Avatrade, said: “The cryptocurrency achieved a major milestone and crossed the $40,000 level, which has made the $50,000 price as real as it can be.”
Rival cryptocurrency Ethereum was up 6.26% over the last 24 hours to $1,269.47 on Friday morning, according to Coinbase data. It was slightly off a new three-year high reached yesterday.
The roaring rally and the sharp drop in Bitcoin of more than 5% to under $37,000 overnight startled some commentators, with the cryptocurrency continuing to sharply divide opinion.
“This could be a massive pump before a major selloff in the coming days. The rally we’ve seen is simply astonishing,” said Neil Wilson, chief market analyst at trading platform Markets.com.
“I’d be mindful of a big crash, but shorting Bitcoin has consistently been a pain trade, like shorting Tesla.”
Bitcoin bears argue that the huge rally in an asset with no fundamental economic factors underpinning it is doomed to crash, as it has in the past. They also cite government regulations as a danger.
However, Wall Street giant JPMorgan said earlier this week that the digital currency could hit $146,000 if investors begin to take it seriously as a safe-haven asset, as they do gold.