Bitcoin is on a tear, ripping up the record books this week as the price hit new all-time highs of $52,173.50 as more mainstream investment institutions begin to take the controversial cryptocurrency seriously.
This week BlackRock, one of the world’s biggest investors, said it has ‘started to dabble’ in Bitcoin. ‘Today the volatility of it is extraordinary but people are looking for storehouses of value’, said Rick Rieder, BlackRock’s chief investment officer of global fixed income, speaking to CNBC.
INFLATION RALLY PLAY
Demand is being driven by people looking for places to stash cash with scope to appreciate if inflation moves higher as global borrowings soar thanks to the coronavirus pandemic, the BlackRock man believes.
The huge asset management firm has joined a growing number of investment institutions and corporates to begin to embrace Bitcoin. In the US, Mastercard has announced plans to knit Bitcoin into its payments network, Bank of New York Mellon is eyeing providing custody services for digital assets, perhaps later this year, while Tesla recently shocked markets by buying $1.5 billion worth of the cryptocurrency.
The pattern is repeating in the UK. Just before Christmas stiff-shirted asset manager Ruffer put money into bitcoin, sending a signal to the market that institutional investors are taking the asset class very seriously.
STAGGERING PRICE SURGE
According to the website www.coinmarketcap.com, the total value of Bitcoins in circulation is $1.58 trillion today. A year ago, the Bitcoin market was worth $178 billion.
Some may view this as another reason to view markets as worryingly frothy, as a plentiful supply of liquidity from central banks keeps them bubbling along. Others will argue the cryptocurrency’s return to favour affirms their view that central banks’ continued provision of cheap cash is only serving to debase existing currencies and open the way to a major reset.
Bitcoin has been a marmite asset - you either love it or hate it (or maybe ignore it), but the big question is whether ‘Bitcoin is going to be the next big global reserve asset’, said Shares editor Dan Coatsworth a few weeks ago.
‘If it is then investors really do need to sit up and take notice.’
