LONDON – Bitcoin has enjoyed a record-breaking week after electric carmaker Tesla and Wall Street finance giants sparked a goldrush for the world’s most popular cryptocurrency, but bubble fears persist.
Investors and mega-corporations alike have been wooed by dizzying growth and the opportunity for profit and asset diversification.
The unit blasted past US$50,000 (RM202,000) on Tuesday following a week in which Tesla invested US$1.5 billion in bitcoin and vowed customers could use it to buy vehicles, and both New York bank BNY Mellon and credit card titan MasterCard announced plans to support bitcoin.
The virtual currency then vaulted higher, topping US$52,000 on Wednesday after investment fund giant BlackRock also confirmed a push into the booming sector.
Yet, this week’s astonishing ascendancy of bitcoin has sparked renewed fears of a big bubble, which the market had last experienced four years ago.
Riding the crypto wave
United States software firm MicroStrategy, meanwhile, announced plans on Wednesday to sell convertible bonds to buy more bitcoin, raising eyebrows in some quarters.
“Suddenly it feels like 2017 again when everyone wanted (to)... ride the crypto wave,” warned Oanda analyst Craig Erlam.
“If companies’ fundamentals are going to become closely tied to movements in bitcoin because they have suddenly become speculators on the side, we are going to be in bubble territory before you know it.”
The unit had previously hit the headlines in 2017 after soaring from less than US$1,000 in January to almost US$20,000 in December of the same year.
The virtual bubble then burst with bitcoin’s value then fluctuating wildly before sinking below US$5,000 by October 2018.
“Bitcoin is an asset that is incredibly volatile and is very risky,” said professor Matthieu Bouvard at the Toulouse School of Economics.
“At the same time, we have been saying for 10 years that bitcoin will collapse, but it’s still there.”
He said the unit’s volatility will decline as its popularity broadens.
One bitcoin is currently worth five times more than a year earlier, while the combined value of all units in global circulation is almost US$1.0 trillion. – AFP, February 19, 2021
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