Bitcoin has jumped another 2.6 per cent today, to an all-time high of $52,932, putting it within touching distance of a market cap of £1 trillion.
The world’s most popular cryptocurrency is on track for a weekly jump of more than eight per cent, having surged around 60 per cent so far this month.
Bitcoin’s gains have been fueled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.
Its latest gains took its market capitalisation – all the bitcoin in circulation – to about $982bn, according to cryptocurrency data website CoinMarketCap, with all digital coins combined worth around $1.6trn.
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.
But bitcoin would need to rise to $146,000 in the long-term for its market capitalisation to equal total private-sector investment in gold via exchange-traded funds or bars and coins, according to JP Morgan.