By Tom Wilson and Stanley White
LONDON / TOKYO (Reuters) – Bitcoin reached another record high on Friday, moving within the sight of a $ 1 trillion market capitalization, eliciting warnings from analysts that it is an ‘economic attendance’ and a weak hedge against a share price.
The world’s most popular cryptocurrency rose 2.6% to a daily high of $ 52,932, setting it on a weekly jump of more than 8%. It has risen about 60% so far this month.
The gains of Bitcoin are fueled by signs that it is gaining acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.
The latest gain has raised its market capitalization – all bitcoin in circulation – to $ 982 billion, according to cryptocurrency data website CoinMarketCap, with all digital currencies combined worth about $ 1.6 billion.
Nevertheless, many analysts and investors remain skeptical about the error-regulated and extremely volatile digital asset, which is still rarely used for trading.
Analysts at JP Morgan said that the current prices of bitcoin are much higher than the estimate of the fair value. The use of the mainstream increases the correlation of bitcoin with cyclical assets, which rise and fall due to economic changes, thus reducing the benefits of diversification in crypto, the investment bank said in a memorandum.
“Crypto-assets remain the weakest hedge for large withdrawals in equities, with dubious diversification benefits at prices so far above production costs, while correlations with cyclical assets rise as crypto-ownership is integrated,” JP Morgan said.
Bitcoin is an ‘economic news show’, he added, calling innovation in financial technology and the growth of digital platforms into credit and payments ‘the true financial transformation story of the COVID-19 era’.
Other investors said this week that the volatility of bitcoin presents an obstacle to its ambitions to become a widespread means of payment.
Tesla boss Elon Musk – whose tweets fueled the bitcoin boom – said Thursday that owning the digital currency is only slightly better than owning cash. He also defends Tesla’s recent purchase of $ 1.5 billion bitcoin, sparking interest in the digital currency.
Graphically: Cryptocurrencies rise multiple times from the lowest points in March – https://fingfx.thomsonreuters.com/gfx/mkt/yzdpxwaynvx/Pasted%20image%201613731432324.png
Proponents of Bitcoin argue that the cryptocurrency is ‘digital gold’ that can protect against the risk of inflation caused by massive stimulus packages from the central bank and the government designed to counter COVID-19.
Still, bitcoin needs to rise to $ 146,000 in the long run for its market capitalization, to offset total investment in the private sector in gold via exchange-traded funds or bars and coins, according to JP Morgan.
Competitive cryptocurrency eater down 0.5%, still close to a $ 1,951 record reached earlier on Friday. It was lifted by growing institutional interest, and after the future was launched on the Chicago Mercantile Exchange.
(Reported by Tom Wilson in London and Stanley White in Tokyo; edited by Sam Holmes and Pravin Char)