On Tuesday, in a significant development, the price of Bitcoin touched its all-time high of $19,000 for the first time in around three years.
Bitcoin, the world’s most popular cryptocurrency was last up by 3% at $18,918, near its all-time record of $19,666. In November, its price jumped by 40% and is up by around 160% this year.
Fuelling this rally has been the demand for riskier assets midst unprecedented fiscal and monetary stimulus by central banks to counter the massive damages the coronavirus-induced pandemic has had on the global economy, as well as the perception that it is resistant to inflation and expectations that in the coming months cryptocurrencies will join the mainstream.
The cryptocurrency’s 12 year history has seen vertical gains and equally sharp drops. Compared to traditional alternatives, such as stocks or bonds, cryptocurrency markets are highly opaque.
This year’s rally has had some investors claiming that the price of the bitcoin could more than quintuple and touch a high of $100,000 within a year; this has seen skeptics rolling eyes saying, it is purely speculative.
“The latest run in bitcoin… has been fuelled by the lack of supply-side liquidity, especially on exchanges,” said Jacob Skaaning of crypto hedge fund ARK36, while adding that the volume of bitcoin on trading platforms was down amid high demand.
According to James Butterfill, digital asset manager at CoinShares, the growing activity in bitcoin derivatives markets “implies that sophisticated investors and institutional investors are now purchasing bitcoin.”
In recent days, smaller cryptocurrencies, which often mirror the Bitcoin’s movements, took a breather after gaining sharply.
Case in point, Ethereum, the second largest cryptocurrency, was down slightly after touching its zenith since June 2018 on Monday, ahead of an upgrade to its blockchain network which is expected to make it quicker and attract more users.