Bitcoin continues its record-breaking rally, crosses $34,000

By Rahul Vaimal, Associate Editor
  • Follow author on
Representational Image

The world’s most valued digital coin Bitcoin surged to a record high of $34,800 last day as the investors continue to bet on the digital currency to become a mainstream asset.

The new record for the world’s most popular cryptocurrency has come in less than three weeks after it crossed $20,000 for the first time and bitcoin has now surged nearly 800 percent since mid-March. This year the digital coin has marked a gain of about $5,000, even though the price came down to $33,000 after the surge.

With bitcoin’s supply capped at 21 million, some investors see it as a hedge against the risk of inflation as governments and central banks turn on the stimulus packages in the wake of the pandemic and it is also seen as a safe-haven play during the COVID-19, similar to gold.

“Some of it is reflecting the fear of a weaker dollar. It seems like people are preferring bitcoin as an expression of concern over currency debasement, relative to gold,” Bank of Singapore currency analyst Moh Siong Sim commended on the most recent rally.

Some analysts think that Bitcoin’s value could rise even further as the US dollar drops. The value of the US currency had surged in March at the start of the pandemic as investors sought safety amid the uncertainty and later it was dropped down due to major stimulus from the US Federal Reserve.

Bitcoin’s surge in value also reflects the increasing expectation that it will become a mainstream payment method, with PayPal opening its network to cryptocurrencies. The potential for quick gains has also grabbed attention from larger US investors, as well as from traders who normally stick to equities.

“The rally gained even more momentum as insatiable investors continued trading from home. Institutional investors see the potential for greater risk-adjusted returns compared to traditional investments,” during the New Year holidays, said Dave Chapman, Executive Director at Hong Kong-based digital asset company BC Group.

With the increase in the value of Bitcoin, the price of other digital currencies also rose sharply. Ethereum, the second-biggest cryptocurrency, gained 465 percent in 2020. Last day, Ether was traded above $1,000 for the first time since January 2018.

The surge in Bitcoin’s value is also bringing concerns to analysts as the digital currency has once proved to be highly volatile. During the rally in 2017 Bitcoin came close to breaking through the $20,000 level and then hit its extreme low of below $3,300.