Bitcoin’s value has hit an all-time high as multiple institutions unveil holdings in the digital currency, boosting hopes that cryptocurrency could finally be reaching mainstream adoption.
In mid-afternoon trading on Thursday, Bitcoin was sitting at around US$23,210, up 15.4% over a 24 hour period and continuing a blockbuster year that has seen its value soar around 224% since January.
The surge in Bitcoin’s value over the year has been attributed to a number of factor’s notably the cryptocurrencies growing reputation as a haven asset against market volatility sparked by the coronavirus pandemic, as well as its use as a hedge against inflation caused by the influx of fiscal support by the world’s central banks.
However, unlike previous rallies, some analysts this value accretion could have more staying power due to the backing Bitcoin is receiving from financial institutions.
On Tuesday, investment fund Ruffer told investors that it has poured GBP550mln into Bitcoin, equivalent to around 2.7% of the funds under its management.
The fund said the decision was “primarily a defensive move”, made by reducing its exposure to the traditional haven asset of gold. Ruffer added that it saw the Bitcoin investment as a “small but potent insurance policy against the continuing devaluation of the world’s major currencies”.
Ruffer isn’t the only institution getting in on the act, with hedge fund One River Asset Management revealing on Wednesday that it is one of the biggest holders of Bitcoin after buying around US$600mln worth of the cryptocurrency with plans to increase this to US$1bn, according to a Bloomberg report.
Meanwhile, payments giant PayPal Inc (NASDAQ:PYPL) has also started to throw serious money into the crypto space after participating in a US$142mln funding round for its partner crypto firm Paxos.
Value could hit US$30,000 in January, says analyst
“Bitcoin’s momentum strategy is not going away anytime soon as the world’s largest investors place medium to longer-term bets. Hedge funds who have resisted Bitcoin can no longer and need to show their investors that they are not missing out on what has become the best trade for the fourth quarter”, said Edward Moya at OANDA.
The analyst added that a “sustainable” level for Bitcoin to hit by the end of the year is US$25,000, however it could rise higher to US$30,000 by the end of January.
“Bitcoin will continue to benefit from the prospects of more monetary and fiscal stimulus, but volatility will remain heightened”, Moya said, however, he warned that the outlook for the world’s largest crypto “might change once the world is ready to ease up on stimulus efforts”.