Is the bitcoin price surge a bubble?
Bitcoin made a new high this week of $19,857, topping its December 2017 record of $19,783.
Bitcoin made a new record high this week, but it has been a characteristically wild ride. The cryptocurrency eclipsed $19,857 (£14,897) on Monday, topping its December 2017 high of $19,783.
That came after last week’s three-year high of $19,374, which was followed by a stomach-churning 14% plunge in a single day. Bitcoin has gained more than 170% so far this year.
The latest surge suggests that cryptocurrencies are overcoming the “credibility hump”, writes Sam Benstead in The Daily Telegraph. PayPal recently announced that it will let customers use bitcoin.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Institutional investors and hedge-fund managers have started to talk about the currency in more positive terms. It is sometimes dubbed “digital gold”: a key attraction is that unlike fiat currency, bitcoin cannot be debased. Only 21 million bitcoins will ever be created.
Google searches for “bitcoin price” have surged to the highest level since June 2019, says Omkar Godbole on coindesk.com. Yet searches are still running at only one-fifth of the level they reached during the bitcoin frenzy of late 2017. That suggests that while there is some froth around, institutional investors are playing a larger role in this rally than they did last time.
A monetary revolution
I have previously compared the buzz around bitcoin to 17th-century “Tulipmania”, says John Authers on Bloomberg. “Tulips, I averred, are at least rather pretty.” Yet unlike investment tulips, which collapsed into obscurity in February 1637, bitcoin “keeps coming back for more”.
There are still reasons to be sceptical, says Izabella Kaminska in the Financial Times. Far from the utopian “decentralised network” desired by its early proponents, bitcoin has become “just another highly intermediated and intensively regulated financial service”. Slow and expensive transaction costs make it a poor fit for the role of digital cash.
And yet as physical cash disappears, enabling governments and firms to encroach ever further into our lives, the appeal of cryptocurrency is only growing. For those who fear that “civil liberties cannot be taken for granted”, bitcoin’s “anonymous security” offers a “doomsday contingency system”.
The rich will increasingly see bitcoin as an attractive store of value, says Niall Ferguson on Bloomberg. The combined wealth of the world’s millionaires was $128.7trn in 2018. If they invested 1% of that in bitcoin, the price could rise to $75,000. Covid-19 has only expedited the world’s rush online, achieving in “ten months” what “might have taken ten years”, which has further cemented the status of cryptocurrencies. “We are living through a monetary revolution so multifaceted that few of us comprehend its full extent.”
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?
Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
By Vaishali Varu Published
-
Review: Three magnificent Beachcomber resorts in Mauritius
MoneyWeek Travel Ruth Emery explores the Indian Ocean island from Beachcomber resorts Shandrani, Trou aux Biches and Paradis
By Ruth Emery Published
-
The industry at the heart of global technology
The semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
By Rupert Hargreaves Published
-
Three emerging Asian markets to invest in
Professional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
By Chetan Sehgal Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published
-
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published
-
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
-
Magic mushrooms — an investment boom or doom?
Investing in these promising medical developments might see you embark on the trip of a lifetime.
By Bruce Packard Published