The storm on bitcoin has been pushing the value of cryptocurrencies to new heights for months. Now another critical landmark is falling.
The cryptocurrency Bitcoin has reached a new milestone in its record hunt: for the first time, according to the data provider Coinbase, all bitcoin in circulation together is worth more than one trillion dollars. Despite a small break at the weekend, the market capitalisation has not yet fallen back below the mark set on Friday; On Monday morning, Coinbase put it at 1.05 trillion dollars. Over the weekend, the price of a bitcoin fell 2 per cent to $56,260. Since the beginning of the month, it has increased by more than 60 per cent.
Just two months ago, the asset, which is debating whether it should be called the motto, had surpassed its 2017 record and broke the price threshold of $20,000. Shortly after that, she skipped the hurdles at 30,000 and $40,000 and had also cracked the 50,000 on Tuesday. The rally had only really picked up speed when Tesla announced that it had invested 1.5 billion in bitcoin. The head of the electric car builder, Elon Musk, is considered a fan of cryptocurrencies. In recent weeks, he had given both Bitcoin and other internet currencies a boost with positive tweets. Credit card provider Mastercard also announced it would open its cryptocurrency payment network.
Analysts warn of risks.
While some analysts see further upside potential, critics warn of the risks of highly volatile digital currencies, which are hardly used in the real economy but serve primarily as fodder for speculators. Current prices are significantly higher than the fair value, according to JP Morgan. For example, crypto assets are “still the worst hedge for larger stock market resetters” with “questionable diversification advantages” at prices well above production costs. Some investors said the high volatility of bitcoin was a hurdle to becoming a widely used payment method.
On the other hand, Bitcoin advocates argue that the cryptocurrency is “digital gold” that allows investors to hedge against rising inflation risk. However, according to JP Morgan, bitcoin would need to rise to $146,000 in the long term for its market capitalisation to be equivalent to the amount private investors had invested in gold through exchange-traded funds, bars and coins.
Currency without a central bank
Bitcoin is a purely digital currency used to send money worldwide in seconds and anonymously. Unlike the euro or the dollar, there is no central bank behind it. Therefore, the price alone is the result of supply and demand. The cyber-devise, which has been in existence since 2008, is controlled by the community of its users. All transactions encrypted in a shared database, the so-called blockchain, accounted for tamper-proof.