Sunday, November 29, 2020

What Is Behind Bitcoin’s 2020 Rally?


Is it an inflation hedge? A currency? Or just another niche asset to take a punt on? Bitcoin is in the headlines, re-kindling a debate over its true role and the drivers behind its latest scintillating rally. Bitcoin, with a history of vertiginous ascents and steep drops, is close to taking out its record peak of near $20,000, having climbed almost 160 per cent this year. Its gains in November alone are more than 30 per cent. As central banks and governments unleashed the money-printing presses and spending taps to combat the damage from the COVID-19 pandemic, plentiful liquidity has lifted assets from emerging currencies and junk bonds to bitcoin and stocks.

Assets under management (AUM) at Grayscale, the world’s largest digital currency manager, have soared to a record $10.4 billion, up more than 75 per cent from September. Its bitcoin fund is up 85 per cent. Smaller rival CoinShares says its AUM has climbed more than 150 per cent this year to $1.3 billion. More broadly, high savings rates have sent money flooding into investment funds, potentially sparking interest in bitcoin as a portfolio diversifier.

JPMorgan analyst Nikolaos Panigirtzoglou says there are signs of family offices, which manage money for wealthy people, allocating towards the cryptocurrency. With governments and central banks in full stimulus mode, some observers reckon bitcoin is a useful safeguard against inflation – with supply capped at 21 million, its scarcity gives it an innate value.

Some who buy gold to hedge inflation risk may be turning to crypto, JPM’s Panigirtozoglou said, adding: “There is a reassessment of bitcoin about its value here as an alternative currency, as an alternative to gold.” But bitcoin’s rise outstrips gold’s gains of 20% or so, while an inflation-linked government bonds index is up 4 per cent. And its rally has sped up in recent weeks even as gold has flatlined, and the resurgent pandemic makes a growth and inflation recovery a distant prospect.

Newsbeep

Part of the gains may be due to growing acceptance of bitcoin as a payments system and by a broader range of investors. Bitcoin has jumped by half since PayPal said last month it would open its network to cryptocurrencies, meaning users could spend bitcoin at its 26 million merchants.. That fanned hopes it could catch on as a way to pay.

Traders who say there is more participation by bigger investors point to lower levels of volatility than during the 2017 bubble. Ten-day price swings against the dollar between end-June and mid-November – a period when bitcoin prices nearly doubled – were well under historical averages. “It’s still largely retail, but it’s becoming more efficient, mature, and I see more professional participants,” said Andrea Leccese of crypto fund Bluesky Capital.

Latest news

टैरो राशिफल 30 नवंबर 2020: वृश्चिक राशि वालों के लिए है अच्‍छा समय, कुंभ-मीन वालों को करनी होगी मेहनत – Tarot Rashifal 30 November...

1. मेष राशिकिसी पुराने दोस्त से मुलाकात होगी. एक पुराना दोस्त आपके किसी नए रिश्ते में तब्दील होता नजर आ रहा है. मन...

‘Stardust’, ‘Last Call’, ‘Zappa’ Theatrical Releases Struggle – Deadline

As states and cities start new stay-at-home orders — specifically Los Angeles county — it is only expected that box office will continue...

‘The Flash’ Pauses Production After Positive Covid-19 Test – Deadline

EXCLUSIVE: A team member working on the CW series The Flash in Vancouver has tested positive for Covid-19, Deadline has learned. The asymptomatic...

Joe Biden Twists Ankle After Slipping While Playing With Dog

<!-- -->Joe Biden later visited an orthopedic specialist in Newark, Delaware. (File)Newark: President-elect Joe Biden twisted his ankle after slipping while playing with...

Related news

टैरो राशिफल 30 नवंबर 2020: वृश्चिक राशि वालों के लिए है अच्‍छा समय, कुंभ-मीन वालों को करनी होगी मेहनत – Tarot Rashifal 30 November...

1. मेष राशिकिसी पुराने दोस्त से मुलाकात होगी. एक पुराना दोस्त आपके किसी नए रिश्ते में तब्दील होता नजर आ रहा है. मन...

‘Stardust’, ‘Last Call’, ‘Zappa’ Theatrical Releases Struggle – Deadline

As states and cities start new stay-at-home orders — specifically Los Angeles county — it is only expected that box office will continue...

‘The Flash’ Pauses Production After Positive Covid-19 Test – Deadline

EXCLUSIVE: A team member working on the CW series The Flash in Vancouver has tested positive for Covid-19, Deadline has learned. The asymptomatic...

Joe Biden Twists Ankle After Slipping While Playing With Dog

<!-- -->Joe Biden later visited an orthopedic specialist in Newark, Delaware. (File)Newark: President-elect Joe Biden twisted his ankle after slipping while playing with...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Close Bitnami banner
Bitnami