Are sceptics wrong at panning Bitcoin that hit a record $24,000 high?

Bitcoin hit an all-time high at noon on Saturday, surpassing $24,000 briefly, in its dizzying rally that has seen it surging more than 300 per cent in one year.

On December 20, 2019, the world’s largest cryptocurrency had traded at $7180.37.

On Saturday, bitcoin reached $24,122.67 before falling back to $23,978.86 -- up 5.49 per cent in intra-day trading -- just two days after it first crossed the $23,000 mark.

The controversial digital asset, vindicating bullish forecasts by its die-hard proponents, seems to be proving sceptics wrong, as it continued its relentless rally and setting several new milestones last week.

According to some Wall Street analysts, bitcoin trading is likely to hit $25,000 or more in the coming weeks.

While more bullish crypto-activists see it maintaining its propensity to reach new levels next year.

Bloomberg Crypto noted that the digital currency could hit $50,000 next year, as macroeconomic, technical and demand versus supply indicators are supportive of the outcome.

However, the key question remains: What is driving the eye-popping ascent of this marquee digital currency brand derided by famous critics and cynics, including Dr Nouriel Roubini and former White House chief economic advisor Gary Cohn, as an asset class with “no intrinsic value, not backed by any asset, and not a legal tender”.

Analysts argued: “But this time it has more to do with investors than speculators.”

They pointed out that institutional investors, including various notable public companies and hedge funds, have entered the digital currency market with sizable deployment of capital.

Another reason cited by them is that further stimulus efforts by various governments have put bitcoin on the map as a quasi-safe haven, possessing many of the store-of-value qualities of gold.

At the same time, a supply crunch is also playing its part with large spot buyers, mostly institutions, creating a shortfall in bitcoin liquidity, pressuring prices to shoot up.

Eric Demuth, the chief executive officer (CEO) of cryptocurrency trading app Bitpanda, was quoted as saying that “this run is completely different from the one in 2017” when the price was driven by mainly retail investors.

An increasing number of asset managers have begun to acknowledge bitcoin as a hedge against currencies and gold. Investing titans such as Paul Tudor Jones have bought into bitcoin, holding a portion of assets under management with the crypto as a hedge against inflation.

Leading online payment platform PayPal recently said its 350 million (m) users would be able to deposit bitcoin and other cryptocurrencies in their accounts soon and spend it at 26 m merchants.

Daniel Gouldman, the CEO of crypto-banking platform operator Ternio, said PayPal’s endorsement could help the cryptocurrency go mainstream.

— issacjohn@khaleejtimes.com