Bitcoin surged Wednesday to a three-year high of $17,891, the highest level since December 2017, after nearly 10% surge in the last 24 hours.
Bitcoin, the world’s most valuable cryptocurrency, has been frequently criticized by critics for historically unreliable prices. It was trading for just $5,000 this March, but in the subsequent markets, investors have been increasingly transformed into Bitcoin, hoping to survive the volatility.
Once the market is proven unstable, investors tend to move money from stocks to what is considered “safe shelter” like cash or gold.
While not a typical “safe shelter” asset, Bitcoin is becoming more popular against expectations, due to analysts, which are attributed to the combination of extreme market uncertainty due to the ongoing pandemic and brewing geopolitical tensions.
They suggest that cryptocurrencies are now considered “shelters” from stock market volatility.
Edward Moya is from Oanda, a currency trading company.
“Covid-19 has disrupted the traditional safe haven trade and the inability to outperform gold. A period of extreme risk aversion has forced many traders to diversify into Bitcoin.”
A fixed supply cap of 21 million Bitcoins leads to their rarity of theirs as they believe they are inherently valuable, potentially protecting the currency from factors such as inflation.
However, Shane Oliver, head of investment strategy and chief economist at AMP Capital, warned of making drastic assumptions with Bitcoin.
“That enormous volatility is rarely a safe haven as a valuable store. I’m far more confident in the $50 notes in my wallet that holds its value over time than Bitcoin, which appears to bouncing off like a yo-yo.”
Eric Demith, co-founder of Cryptocurrency Firm Bitpanda, said the current price hike for Bitcoin is largely on institutional money, but added that recent Google search trends have shown that consumer interest is beginning to recover.
“We’re constantly watching daily sign-ups from retail customers who are new to Crypto Market,” Demith said. “What we are experiencing now is a change in mentality where younger generations view Bitcoin as the money of their generation.”
But Oanda’s Moya warned traders to prepare for more volatility in the coming months as Bitcoin prices are expected to shake again.
“A high-frequency trading system that promotes hedge fund volume and Bitcoin high can lead to exaggerated movements when prices approach the $20,000 level. Traders should expect a $1,000 swing in minutes.”
He added that the current headline, which praises the surge in Bitcoin prices, is usually of interest and value for those who don’t invest in cryptocurrencies, but people still generally take note of cryptocurrencies.
Following the famous hacking smart, there is widespread concern about scams.
I’m not sure about Oliver at AMP Capital. “I think most people will put more trust in government-run digital currency, not something like Bitcoin.
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Junior journalist for a British investor magazine. It focuses primarily on finance and business content. I have a personal interest in Middle Eastern politics, human rights issues and sustainability initiatives.
