Bitcoin’s record-breaking and volatile 2020, aided by increased popularity among individual investors, could be set for calmer times according to specialists, despite the new year starting with more sizeable swings.
Having quadrupled in price last year also on strong institutional interest, the leading virtual currency soared by 20 percent in just 72 hours to reach an all-time high $34,792 on Sunday.
On Tuesday around 1630 GMT it stood at $32,570.
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Since mid-December, “you finally saw (individual)… investors come in”, noted Antoni Trenchev, co-founder of specialist cryptocurrency platform Nexo.
Bitcoin purchases have opened up to the wider public thanks to the ability to buy fractions of one whole unit, while Paypal account holders can now use the virtual currency for online transactions.
But even buying fractions of one bitcoin can leave small investors with big losses.
“If you want to get caught up in day-to-day movements, you need to be a pro with the stomach for stormy waters,” Trenchev told AFP.
“There’s no certainty in any asset class, bitcoin least of all,” he cautioned.
The cryptocurrency’s recent highs were achieved at weekends and during the festive period when many brokers were away from work.
Correction or crash?
Fawad Razaqzada, analyst for ThinkMarkets, believes like several analysts that a longer-lasting price correction awaits.
“The extended run means a lot of investors and speculators will be happy to book profit on the first sign of weakness, especially in the current economic climate,” he forecast.
As the price approached $25,000 towards the end of last year, the boss of financial consultants deVere, Nigel Green, announced he had sold half his bitcoins.
“It should now be treated as any other investment — that’s to say, where possible, it’s better to sell high and re-buy in the dips,” Green said.
In its 12-year history, bitcoin has suffered several wild price swings with rebounds not always immediate.
Despite the volatility, many investment funds continue to buy bitcoin, while banking giants have compared it to haven investment gold.
Debate rages over the status of the digital asset, launched in late 2008, as to whether it should be considered a form of money, an asset or a commodity.
While its biggest critics continue to criticise bitcoin’s apparent disconnect from the real economy, other analysts believe it can avoid repeating past crashes while also igniting wider interest in its rivals.
“Bitcoin’s wild swings will likely spark interest into some of the other cryptocurrencies, such as ethereum,” said Oanda trading group analyst Edward Moya.
Unlike bitcoin, ethereum has not returned to its all-time high but the second biggest cryptocurrency in terms of market capitalisation has seen its price soar by 70 percent in the past month to reach $1,000.
This story has been published from a wire agency feed without modifications to the text.