Bitcoin briefly tops $16,000 amid rebound
Bitcoin’s rebound took it briefly above $16,000 on Tuesday as traders of the biggest digital currency sought to end its rollercoaster five-day slump.
The currency rose as high as $16,132.09 and was poised for the biggest gain on a closing basis in more than two weeks and the first in six days. It was up 15%, at $15,860, shortly after 1 p.m. Pacific time. Rival currencies litecoin and ethereum were up 5.6% and 2.5%, respectively, according to data compiled by Bloomberg.
High trading volumes at Coinbase, one of the biggest exchanges, led Coinbase to issue a warning on its website that transactions for bitcoin and ether may be delayed by several hours.
The gains will be a relief for cryptocurrency bulls. Recently, bitcoin’s price plunged as much as 44% after reaching a record in what was seen as a major test for the nascent digital currency industry. Tuesday’s rise suggests that, even as financial authorities issue warnings about the risks of a bubble in the asset class, investor interest remains intact.
“The most important question facing it is whether the recent price correction will prove to be what market participants refer to as ‘healthy,’ ” Mohamed El-Erian wrote in a Bloomberg View column Tuesday. In other words, he said, will it be one that shakes out “excessive irrational exuberance, provides for the entry of institutional investors, encourages the development of market-deepening products and widens and balances out the investor base and the product offering”?
The answer may determine bitcoin’s future. A debate is raging over the sustainability of the rally in which the currency’s price has soared more than 1,500% this year. Bulls argue that the nature of the cryptocurrency and the blockchain technology behind it is a game changer for the world of finance, while bears say that bitcoin has no intrinsic value and that price moves display the hallmarks of a speculative asset bubble.
Attention is also increasingly turning to rival digital tokens. Since bitcoin hit a record $19,511 on Dec. 18, it has underperformed peers such as ripple and ethereum.
Bitcoin is the cryptocurrency benchmark, but it’s not the best representation of the technology, Bloomberg Intelligence analyst Mike McGlone wrote Sunday. A proper focus for institutional investors is probably the broader market, including “forks” and secondgeneration offshoots that address bitcoin’s flaws, he said. When the frenzy subsides, second-generation digital currencies should continue to gain on bitcoin, McGlone said: “Ethereum appears prime to assume benchmark status, though bitcoin forks ripple and litecoin are the primary up-andcoming contenders.”