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Bitcoin price: Bitcoin goldrush sparks fears of speculative bubble | International Business News




LONDONR: Bitcoin has enjoyed a record week as electric car makers Tesla and Wall Street finance giants lit a gold brush for the world’s most popular virtual currency, but the fear of bubbles persists.
Investors and mega-corporations alike have been deceived by the dizzying growth and opportunity for profit and asset diversification.
The unit exploded $ 50,000 on Tuesday after a week in which Tesla invested $ 1.5 billion in bitcoin and vowed that customers could use it to buy vehicles and both New York banks BNY Mellon and credit card titan MasterCard announced plans to support Bitcoin.
The cryptocurrency then rose higher, crossing $ 52,000 on Wednesday after investment fund giant BlackRock also confirmed a push in the booming sector.
However, this week’s stunning rise of bitcoin has sparked new fears of a huge bubble the market had last experienced four years ago.
US software firm MicroStrategy meanwhile announced plans Wednesday to sell convertible bonds in order to buy more bitcoin, raising eyebrows in some neighborhoods.
“Suddenly it feels like 2017 again when everyone wanted (to) … ride the crypto wave,” warned OANDA analyst Craig Erlam.
“If enterprise bases are to be closely linked to movements in bitcoin because they have suddenly become sideways speculators, we will be in bubble territory before you know it.”
The unit had previously hit the headlines in 2017 after rising from less than $ 1,000 in January to almost $ 20,000 in December of that year.
The virtual bubble then exploded with the value of Bitcoin, then fluctuated sharply before sinking below $ 5,000 by October 2018.
“Bitcoin is an asset that is highly volatile and very risky,” said Professor Matthieu Bouvard at the Toulouse School of Economics.
“At the same time, we have said for ten years that bitcoin will collapse – but it is still there,” he told AFP, adding that the unit ‘s instability will decline as its popularity expands.
One bitcoin is currently worth five times more than a year ago, while the combined value of all units in global circulation is nearly $ 1.0 trillion.
Industry professionals maintain however that bitcoin is a new and essential financial unit of the future.
Eric Demuth, chief executive of cryptocurrency broker Bitpanda, describes bitcoin as the “new digital gold” that is valued by investors seeking to diversify assets and guard against inflation.
“Bitcoin will soon be added to the central banks’ balance sheet,” Demuth told AFP.
A number of central banks have indeed announced plans for bank-backed digital units, but are very skeptical of bitcoin because of its sleek nature – and the fact that it remains unregulated.
European Central Bank President Christine Lagarde said this month that bitcoin was not “a currency” and was a “highly speculative” asset that requires global regulation.
At the same time, Europe represents only ten percent of bitcoin purchases from investment funds, according to cryptocurrency data provider ByteTree.
Meanwhile, US companies have been faster than their European counterparts to embrace the unit.
“The difference between the US and Europe in that respect is the same with almost any kind of adaptation to new technology. It always only takes a little longer. In the US, they started two years ago,” Demuth noted.

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