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Bitcoin hits $26k: Is it headed towards another bubble?

·4-min read
Will the Bitcoin rally turn out to be another bubble? (Source: Getty)
Will the Bitcoin rally turn out to be another bubble? (Source: Getty)

As widely predicted, the price of Bitcoin has hit an all-time high, breaching the US$20,000 (AU$26,361) mark on Wednesday – and it’s expected to keep climbing.

At the time of writing, Bitcoin’s price had risen by more than 10 per cent to around US$21,489.

The digital cryptocurrency’s price has leapt by more than 400 per cent since March, with a rise of 45 per cent in the month of November alone.

The last time Bitcoin was close to US $20,000 was 2017. But the high didn’t last long; it turned out to be a bubble, with its value snapping back mere months afterwards.

Is this another Bitcoin bubble?

BTC Markets CEO Caroline Bowler doesn’t think so. For one, its growth has been steady, rather than a surge riding off ‘FOMO’.

“The trading we’ve seen in 2020 has been a gradual appreciation, coming off a higher baseline than 2017-2018,” she told Yahoo Finance.

Trading volumes on the BTC Markets platform have also been “steady”, Bowler added.

“This indicates an engaged and active trading base – not a frothy spill into the market, chasing the hype.

“2020 has also seen institutional investors, fund managers and traditional financial players all move into cryptocurrency and digital assets. This is not another 2017.”

eToro co-founder and CEO Yoni Assia described the US$20,000 mark as a “momentous milestone”, adding that the demographic of people interested in cryptocurrency had shifted over the years.

Recently, S&P Dow Jones Indices announced plans of launching crypto indices next year.

“From data programmers and blockchain scientists to plumbers and hairdressers, bitcoin has excited people from all walks of life,” he said.

Financial institutions, banks and hedge funds have also invested in the digital currency, he added. UK asset manager Ruffer also updated clients on Tuesday about its new 2.5 per cent portfolio allocation to the digital coin, CNBC reported.

“Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see,” the company said.

Bitcoin exchange Kraken managing director Jonathon Miller told Yahoo Finance in September that the currency was “the ultimate hedge in the long run”.

“There will only ever be 21 million bitcoins, so there will always be a limited supply. And the internet isn’t going anywhere,” he said.

“So, as far as digital money goes, and a native currency to the internet, it’s very hard to argue that Bitcoin and other cryptocurrencies are going to go away.”

(Source: Yahoo Finance)
Bitcoin's price. (Source: Yahoo Finance)

Interest in Bitcoin is expected to continue into 2021 amid global fears of inflation, Assia added.

“Now, people all across the world recognise the ways that crypto can be adopted, whether that’s as part of an investment portfolio or using it to pay for a pizza.”

Blockchain, the technology underpinning Bitcoin, has also been lauded for its many use cases, including cross-border payments, anti-money laundering tracking system, supply chain and logistics monitoring, and secure data sharing.

“I’ve been a big believer in blockchain technology for many years and think it can help solve some of the world’s ills by helping to bank the unbanked and reduce wealth inequality,” said Assia.

“Our not-for-profit initiative GoodDollar has already started to try and level the playing field, by developing a crypto based on a universal basic income (UBI) principles.”

Is it too late now to invest?

The cryptocurrency’s price has reached new heights, so you might think you’ve missed the boat on this investment.

But it’s expected to keep breaking new records. and cryptocurrency trading platform HiveEx co-founder Fred Schebesta anticipates the current Bitcoin rally will continue, with its price to more than double.

“I think this big run will settle at US $50,000-$100,000 before it pulls back a bit,” Schebesta told Yahoo Finance.

By around 2023, Schebesta predicts Bitcoin’s price will reach US $250,000.

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