Bitcoin Breaks All Records Again, Tesla Buys Cryptocurrency Worth USD 1.5 BillionFinance | February 19, 2021, Friday // 15:57| views
Bitcoin hit yet another record high on Friday, and moved within sight of market capitalisation of $1 trillion a, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.
The world’s most popular cryptocurrency jumped 2.6% to an all-time high of $52,932, setting it on course for a weekly jump of over 8%. It has surged around 60% so far this month.
Bitcoin’s gains have been fuelled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.
Its latest gains took its market capitalisation - all the bitcoin in circulation - to about $982 billion, according to cryptocurrency data website CoinMarketCap, with all digital coins combined worth around $1.6 trillion.
Still, many analysts and investors remain skeptical of the patchily-regulated and highly volatile digital asset, which is still little used for commerce.
Analysts at JP Morgan said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into crypto, the investment bank said in a memo.
“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” JP Morgan said.
Bitcoin is an “economic side show,” it added, calling innovation in financial technology and the growth of digital platforms into credit and payments “the real financial transformational story of the COVID-19 era”.
Other investors this week said bitcoin’s volatility presents a hurdle for its ambitions to become a widespread means of payment.
On Thursday, Tesla boss Elon Musk - whose tweets have fuelled bitcoin’s rally - said owning the digital coin was only a little better than holding cash. He also defended Tesla’s recent purchase of $1.5 billion of bitcoin, which ignited mainstream interest in the digital currency.
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