Inflation fears bolster Bitcoin
CRYPTO-CURRENCY Bitcoin hit a three-week high of $66,357 yesterday as investors sought protection against the rising threat of inflation.
Its price is only just below the all-time high of $67,000 (£49,000) set on October 20, taking the total crypto market above $3trillion for the first time.
Bitcoin is up more than 50 per cent since the start of October while popular crypto Ethereum jumped 58 per cent to hit a fresh record of $4,768.
Yet experts warn the crypto market is highly volatile and the latest surge could lure in yet more investors.
They are piling in believing that the monetary stimulus programmes are fuelling inflation which will see a reduced value of money over time, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
She cautioned that this was “a highly risky strategy” given crypto volatility, while energy-intensive mining is bad for the climate and will attract adverse headlines following the COP26 climate conference.
She warned of a potential “mini selloff” if the US Federal Reserve and other central bankers taper stimulus such as bond purchases. The Financial Conduct Authority recently said that 14 per cent of UK crypto investors went into debt to invest.
“This fresh rise in the coin risks taking more vulnerable consumers for a rollercoaster ride,” Streeter said.
Fawad Razaqzada, market analyst at Thin kMarkets, said institutional demand was boosted by the October launch of the Pro Shares Bitcoin Strategy exchange traded fund on the New York Stock Exchange, amid signs of US regulatory easing.
He said: “With price pressures surging, Bitcoin and other cryptos are providing a cost friendly alternative to gold as a means of hedging against inflation.”
Razaqzada said investors remain willing to embrace risk generally, with the US S&P 500 index and some of the European major indices hitting new highs.
Demand has been further boosted after Australia’s biggest bank said it would offer crypto trading to retail customers, while Singaporean authorities have sounded positive.