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Bitcoin Mania Reaches New Heights as Prices Go Parabolic

The frenzied rally in Bitcoin is mesmerizing Wall Street like never before as prices keep smashing new records.

After a parabolic 2020, the digital currency kicked off the new year by rallying above $34,000 over the weekend, marking a surge of about 40% since Dec. 24. Behind the dizzying rally is a speculative fever from retail and institutional investors on the belief that cryptocurrencies are emerging as a mainstream asset class and can act as a store of value.

As ever in the world of crypto, it’s hard to pinpoint the proximate cause for the latest Bitcoin advance. But whether you see it as the latest sign of institutional interest or FOMO pure and simple, the mania is getting harder for the mainstream to ignore.

Believers in Bitcoin point to the market’s supply constraints and supposedly rampant money printing by central banks as key drivers of bullish narrative. Others say that cryptocurrencies are a bubble in the making and another sign that crazy risk taking has taken over global markets.

“Hot Nasdaq stocks, Chinese Internet plays and promising biotechs all of a sudden seem dull compared to the action unfolding in the crypto-currency space,” said Louis Gave, co-founder of Gavekal Research.

On Monday, Bitcoin dipped 7.5% to $31,087 as of 10 a.m. in London. The digital token has seen some of it best gains on Saturday and Sunday, which analysts say is a hallmark of strong retail activity. This weekend was no exception, with prices adding 15% over the two days.

After a year that’s seen Robinhood investors emerge as a powerful market force, some are wondering whether small traders could move out of technology stocks and into cryptocurrency speculation.

“Bitcoin’s growing market cap has to come at someone’s expense,” said Gave. “Will the marginal retail dollar start to forgo 2020’s Robinhood darlings and instead shift toward the roaring crypto market?”

The weaker dollar could also be playing a role in Bitcoin’s furious ascent, said Paul Hickey of Bespoke Investment Group. “The last time the dollar saw a larger six-month decline was in the second half of 2017,” he said. “That’s also the same time that bitcoin first started to go mainstream.”

The rally is also broadening out to other cryptocurrencies. Ether climbed as much as 22% on Monday to $1,163 after a 30% advance on Sunday.

“This rotation happens usually when Bitcoin has a large rally and investors rotate profits” into other digital coins, said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore.

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