The world's most popular cryptocurrency jumped 2.6% to an
all-time high of $52,932, setting it on course for a weekly jump of over 8%. It
has surged around 60% so far this month.
Bitcoin's BTC=BTSP gains have been fuelled by signs it is
winning acceptance among mainstream investors and companies, from Tesla TSLA.O
and Mastercard MA.N to BNY Mellon BK.N.
Its latest gains took its market capitalisation - all the
bitcoin in circulation - to about $982 billion, according to cryptocurrency
data website CoinMarketCap, with all digital coins combined worth around $1.6
trillion.
Still, many analysts and investors remain sceptical of the
patchily-regulated and highly volatile digital asset, which is still little
used for commerce.
Analysts at JP Morgan said bitcoin's current prices were
well above estimates of fair value. Mainstream adoption increases bitcoin's
correlation with cyclical assets, which rise and fall with economic changes, in
turn reducing benefits of diversifying into crypto, the investment bank said in
a memo.
"Crypto assets continue to rank as the poorest hedge
for major drawdowns in equities, with questionable diversification benefits at
prices so far above production costs, while correlations with cyclical assets
are rising as crypto ownership is mainstreamed," JP Morgan said.
Bitcoin is an "economic side show," it added,
calling innovation in financial technology and the growth of digital platforms
into credit and payments "the real financial transformational story of the
COVID-19 era".
Other investors this week said bitcoin's volatility presents
a hurdle for its ambitions to become a widespread means of payment.
On Thursday, Tesla boss Elon Musk - whose tweets have
fuelled bitcoin's rally - said owning the digital coin was only a little better
than holding cash. He also defended Tesla's recent purchase of $1.5 billion of
bitcoin, which ignited mainstream interest in the digital currency.
Bitcoin proponents argue the cryptocurrency is "digital
gold" that can hedge against the risk of inflation sparked by massive
central bank and government stimulus packages designed to counter COVID-19.
Yet bitcoin would need to rise to $146,000 in the long-term
for its market capitalisation to equal total private-sector investment in gold
via exchange-traded funds or bars and coins, according to JP Morgan.
Rival cryptocurrency ether ETH=BTSP traded down 0.5%, still
near a record of $1,951 reached earlier on Friday. It has been lifted by
growing institutional interest, and after its futures were launched on the
Chicago Mercantile Exchange.
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