Bitcoin has for the first time hit a market cap of $1 trillion, following a month that saw the cryptocurrency rocket more than 60 per cent in value.
The world’s most popular cryptocurrency is now worth nearly $54,000 at the time of writing, a new all-time high.
Bitcoin’s gains have been fueled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.
Ava Trade chief market analyst Naeem Aslam said Bitcoin reaching $1trn was “the most exciting news of the year.”
“This was long coming and the fact is that we are only 10 times away from flipping the gold market cap on its head. This is certainly a big news for the industry and this would not have been possible without the involvement of smart money.
“The payment integration and store of value are the factors which are driving the price higher and as long as this support remain in place, we are likely to have even bigger headlines.”
Many analysts and investors remain sceptical of the patchily-regulated and highly volatile digital asset, which is still little used for commerce.
Analysts at JP Morgan said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into crypto, the investment bank said in a memo.
“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” JP Morgan said.
Bitcoin is an “economic side show,” it added, calling innovation in financial technology and the growth of digital platforms into credit and payments “the real financial transformational story of the COVID-19 era.”
Other investors this week said bitcoin’s volatility presents a hurdle for its ambitions to become a widespread means of payment.
Bitcoin proponents argue the cryptocurrency is “digital gold” that can hedge against the risk of inflation sparked by massive central bank and government stimulus packages designed to counter COVID-19.