First it went through $US20,000. Then 10 days later, it broke through $US25,000, and then, with seldom taking a breath, it crossed $US30,000. At this point only a couple of days into 2021, the price of bitcoin has crossed $US40,000.
Nothing’s new with the digital currency of the month since it crossed $US20,000 – there’s been no big change in the way it is generally used. While many investors are currently making use of the notoriously volatile currency as a “store of value,” that is traditionally a name conserved for safe haven investments as gold and other precious metals.
“Will you be in a position to buy a cup of coffee with bitcoin? Probably not with the current variant of Bitcoin. It is basically become a store of value,” said Mike Venuto, a co-portfolio supervisor of the Amplify Transformational Data Sharing ETF, a $US391 million ($503 million) exchanged traded fund which focuses on blockchain technologies and businesses that deal with cryptocurrencies.
Media attention to the rise of its has only additional fuel to the rally. But investors in digital currencies as well as businesses that trade or “mine” them are warning men and women to be sceptical of Bitcoin’s recent rise and also to be braced for a great deal of volatility.
It has been a wild ride for bitcoin the last 3 years. The digital currency made its big Wall Street debut in December 2017, when the major futures exchanges rolled out bitcoin futures. The focus drove Bitcoin to roughly $US19,300, a then unheard of selling price for the currency.
Well then it all evaporated. The currency’s value plunged sharply in 2018, and by December of that season Bitcoin was worth lower than $US4,000 a coin. Up until this most recent rally which originated from October, Bitcoin generally floated between $US5,000 and $US10,000.
While during the last two years companies have embraced the technology that underlies digital currencies as Bitcoin, a principle called the blockchain, the particular uses for Bitcoin haven’t really changed since its rally 3 years ago. It’s nonetheless mostly used by those distrustful of the banking system, criminals seeking to launder money, and for the majority of part, as a department store of value.
The truth is, other investments usually used as safe havens throughout uncertain times – notable precious metals – have been trading at near record highs as well.