Bitcoin and ether hit all-time highs in a cryptocurrency rally that some analysts attributed partly to the search for a hedge against inflation.
Bitcoin, the world’s largest digital token, jumped as much as 3.6% to $68,513, while ether posted a more modest advance to about $4,840. The total value of digital tokens tracked by CoinGecko reached some $3.1 trillion.
Trying to work out why virtual currencies are rallying is often a fraught task, but some theories pointed to the appetite for assets that can deliver returns even as the pandemic recovery stokes inflation. Bitcoin is up more than 130% this year and ether some 550%, though for critics the volatility inherent in digital tokens damages their claims to being a store of value.
Inflation hedges are “in demand with crypto leading,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note, adding that “crypto is where the fast money is at.”
Record-low real yields may also be stoking appetite for riskier investments, potentially pushing some markets to perilous levels. The Federal Reserve in a report warned asset prices are vulnerable if sentiment sours. It also flagged dangers from stablecoins, a type of token supposed to have a steady value.
Bitcoin last scaled a record in October following the launch of the first bitcoin-linked exchange-traded fund for U.S. investors. The landmark step fed the narrative that virtual coins are winning greater mainstream acceptance, including from institutional investors.
‘Final’ Push Higher
Still, the ride has been volatile. The token plunged below $30,000 in June amid criticism of its energy consumption and China’s cryptocurrency crackdown. It then recovered in part as the crypto sector adjusted to China’s broadsides.
“This breakout in bitcoin might signal the start of a final push-up for the fourth quarter before the crypto market shows more pronounced consolidation into next year,” Fundstrat said in a technical-strategy report Monday. “Strength in bitcoin, Ethereum and many other altcoins looks likely in the weeks to come.”
Another theory for the bitcoin rally is the seemingly ubiquitous Elon Musk, the world’s richest man. Musk’s Twitter followers in a poll he set up voted in favor of the billionaire selling 10% of his stake in electric-carmaker Tesla Inc.
That brings up the question of what he might do with the proceeds. Musk has previously said he’d like to see bitcoin succeed and that he personally has bought bitcoin, ether and dogecoin.