Bitcoin surges; investors say ‘crypto winter’ is over
Price has rocketed in recent days, even as major financial markets have faltered
Winter is over for the cryptocurrency market.
At least that is the conviction among proponents of digital currencies. The price of bitcoin has rocketed in recent days, even as major financial markets have faltered amid escalating trade tensions.
Bitcoin, the world’s largest cryptocurrency by market value, shot back above $8,000 Tuesday morning in Asia for the first time since July. Just last week it was below $6,000; earlier this year it traded at around $3,500.
Investors point to increasing institutional support. For example, Facebook Inc. is building a cryptocurrency-based payments system on the back of its social network, The Wall Street Journal reported earlier this month, in what would most likely be the most mainstream application yet of cryptocurrency. The company also said last week that it was easing restrictions on cryptocurrency and blockchain-related ads on its platform.
Meanwhile, a new project backed by the owner of the New York Stock Exchange, called Bakkt, said on Monday it
would start testing bitcoin futures this summer, after earlier delays.
Darren Li, a Chinese cryptocurrency investor who recently moved to Singapore, said investors within China might also find bitcoin particularly appealing as the yuan has weakened and trade tensions have risen. He said some over-the-counter providers enable investors to trade yuan for cryptocurrencies, circumventing the country’s capital controls.
Adrian Lai, managing director at BlackHorse Group, a cryptocurrency investment company in Hong Kong, said his firm purchased about 80 bitcoins over the past few weeks.
“We were convinced the bottom was in,” he said.
Mr. Lai said trade tensions showed the “power of centralization”—boosting the appeal of bitcoin as an asset class outside government control.
Bitcoin is up over 50% in May alone, on pace for its best month since November 2017.
The strong performance this year has advocates arguing “crypto winter”—a phrase to describe cryptocurrency’s steep bear market—has come and gone.
“One key sign of crypto winter being over is you’re seeing the market isn’t really reacting to negative news,” Mr. Lai said.
Binance, one of the world’s largest cryptocurrency exchanges, said last week hackers stole more than $40 million of bitcoin in a “large scale security breach.”
The market barely budged on that news.
Meanwhile, the New York attorney general’s office said last month that another exchange, Bitfinex, had covered up a loss of $850 million of corporate and customer funds using the reserves of the digital currency it controls, tether.
Bitcoin has risen since the allegations were made public.
Other cryptocurrencies including ether, XRP and Bitcoin Cash have also risen in value. But bitcoin has fared better than most.
Bitcoin now accounts for 60% of the total cryptocurrency market capitalization, the highest since December 2017, according to research site CoinMarketCap, a sign investors are gravitating toward bitcoin more so than other so-called alt coins.
Of course, bitcoin remains far from its 2017 highs, when it soared from $1,000 to nearly $20,000, with most of the rally in just a few months.
And bitcoin is historically volatile, with most big moves clustered in a few days. Since 2013, if bitcoin’s 10 top-performing days each year were excluded, the cryptocurrency would be down 40% annually, according to an analysis by Thomas Lee, co-founder at Fundstrat Global Advisors in New York.
Some investors view the recent rapid surge with skepticism.
Tony Gu, founding partner at NGC Ventures, a blockchain investment fund, said he sold some bitcoin recently to rebalance his portfolio. “When everyone is bullish, it’s time to sell,” he said.