The value of Bitcoin (BTC) has begun the new year the same way it ended 2020 -- hitting staggering new highes.
The digital currency’s value hit a high of $34,800 over the weekend before settling back slightly on Asian markets on Monday morning. Recall that it was only three weeks ago that the coin’s value crossed $20,000 for the first time.
The value is now up 800 percent since March, when the beginning of the coronavirus (COVID-19) pandemic reduced the value of just about everything.
While individual investors -- especially young people -- were among the first to adopt Bitcoin enthusiasm, analysts say they are not the ones powering the digital currency’s latest boom. Rather, it’s institutions that control billions of dollars in assets that are moving into the space.
Individual investors still holding Bitcoin are reaping the benefits of that move. But will it last? As with any investment, there are no guarantees.
Analysts say a couple of factors are fueling the rise. They point to the massive amounts of government spending since the beginning of the pandemic, which eventually will likely erode the value of the dollar.
There will never be more than 21 million bitcoins, suggesting its value will increase as governments print more currency. Institutional investors have been buying bitcoins at high levels in the second half of 2020 as a hedge against coming inflation.
Historically, gold has been that “safe haven” hedge against inflation. But gold prices, while slightly higher in recent weeks, haven’t had nearly the run that Bitcoin has enjoyed.
Analysts say the decision by Paypal to allow people to use their accounts to buy and sell bitcoins was a huge catalyst for the late-year surge. That makes converting dollars to Bitcoin a much simpler process.
At the same time, it could make it much easier for consumers to start using their Paypal accounts to make purchases in bitcoins instead of dollars.