Cryptocurrencies: Bitcoin hits $1trn value as crypto index’s performance tops other assets

*Price of largest digital token surges to as much as $55,736.29, which has stoked over 100% jump in crypto index in 2021, towering over stocks, gold, commodities and bonds in 2021

Emmanuel Akosile | ConsumerConnect

Although authorities in several lands and some investment experts have maintained that cryptocurrencies are both confusing and alluring to most consumers, Bitcoin’s market value has reached $1 trillion for the first time, a surge that is helping cryptocurrency returns far outstrip the performance of more conventional assets, such as stocks, gold, commodities and bonds.

The largest digital-asset has added more than $450 billion of value in 2021 to more than $1 trillion, data compiled by Bloomberg show.

The Bloomberg Galaxy Crypto Index, which includes Bitcoin and four other coins, has more than doubled.

Speculators, corporate treasurers and institutional investors are thought to have stoked Bitcoin’s volatile ascent.

Crypto believers are dueling with skeptics for the dominant narrative around the climb: the former see an asset being embraced for its ability to hedge risks such as inflation, while the latter sense a precarious mania riding atop waves of monetary and fiscal stimulus.

Simultaneously, the argument has been made that assigning a market capitalisation isn’t an accurate representation since Bitcoin isn’t a company or even an asset.

Skeptics say without real-world assets that companies possess or government backing like the dollar, all investors are really buying into is faith in the cryptocurrency’s network.

As Bitcoin grows to $1 trillion in market value, the fear of missing out (FOMO) may be at play, said Shane Oliver, Head of Investment Strategy with AMP Capital Investors Limited, in Sydney, Australia.

Oliver stated: “In times of easy money, this gets magnified and it’s partly what’s driving the current interest.”

The crypto index’s performance yet towers over stocks, gold, commodities and bonds in 2021, report noted.

Tesla Inc. in February 2021 disclosed a $1.5 billion investment and MicroStrategy Inc. boosted a sale of convertible bonds to $900 million to buy even more of the token.

That brought the coin closer to corporate America, according to report.

Craig Erlam, Senior Market Analyst with Oanda Europe Limited, said: “If companies’ fundamentals are going to become closely tied to movements in Bitcoin because they’ve suddenly become speculators on the side, we’re going to be in bubble territory before you know it.”

But, Tesla Chief Executive Officer Elon Musk posted a somewhat cryptic tweet Friday, February 19 that appeared in part to defend the company’s action.

Musk’s noted that it “is simply a less dumb form of liquidity than cash” while adding that the electric vehicle maker’s decision isn’t “directly reflective of my opinion.”

The “long Bitcoin” trade is seen as among the most crowded in the world alongside technology exposure and dollar shorts, according to the February edition of Bank of America’s global fund manager survey.

AMP’s Oliver said if Bitcoin “falls out of favour, for example, due to government regulation or investors just moving on to the next new thing, then it could quickly plunge.”

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