It’s been a quiet start to the trading day in London with the FTSE 100 flat and the pound little changed on balance. The same can’t be said for Bitcoin with the cryptocurrency smashing through the $5000 barrier to trade at a new all-time high.
Bitcoin adds to incredible 2017 gains
The meteoric rise in the value of cryptocurrencies has been one of the biggest stories in the financial markets this year, and with market leader Bitcoin, hitting another record high today, levels of euphoria are reaching fever pitch. There have been a growing number of critics quick to suggest that their intrinsic value isn’t befitting of such lofty valuations but this hasn’t deterred investors from piling in and pushing prices higher. Bitcoin is now sitting on scarcely believable gains in excess of 400% YTD and with a market cap of approximately $84B it is rapidly transforming from a niche alternative asset reserved for computer geeks into something that the wider public are looking to invest in. It is also worth noting that the market share for Bitcoin has roughly halved this year despite its incredible gains, showing that the broader cryptocurrency market has outstripped the pace of growth of Bitcoin by a factor of almost 2:1.
Will the bubble burst?
Parabolic rises, such as those seen in cryptocurrencies this year, often end in dramatic plunges when the bubble eventually bursts. Despite the amazing gains seen in 2017 there have been two steep declines; one in early July when concerns surrounding a software upgrade saw a drop of just under 30% and more recently when, just last month, China clamped down on both initial coin offerings (ICOs) and domestic crypto exchanges and well publicised criticism from JP Morgan CEO Jamie Dimon sent the market into a tailspin which wiped off around 40% of the market’s value. This latest surge will no doubt serve to reinforce ardent bulls opinion that Bitcoin is the next “big thing”, whilst simultaneously offering cynics further ammunition to support their bubble claims. Speculating in this asset class is not for the faint-hearted, but with large swings comes great opportunities and the high levels of volatility compared to fairly tranquil moves in traditional asset classes is attracting an increasing number of investors into the cryptocurrency market.
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