Bitcoin hit a new all-time high yesterday, passing the $23,000 mark for the first time and continuing an incredible rally that has seen the cryptocurrency more than triple in value this year.
BTC had only just broken the $20k barrier for the first time the previous day, but a further 12% brought its price up to a peak of $23,421, before dropping off slightly to $22,600 by this morning.
The driving force behind Bitcoin’s rapid ascension through 2021 has been the Coronavirus pandemic and the impact it has had on the economy. There has been increased demand from institutional investors, who see BTC as a deflationary asset similar to gold and are using it to hedge against the financial chaos brought on by the global crisis. Strategists at JPMorgan recently warned that the increased interest in cryptocurrencies comes to the detriment of gold.
Despite the impressive performance through 2020 there remain many unconvinced this is a trend set to continue. Some have pointed to the famous rally in 2017, when BTC rose to $17k before falling back down to around the $3k mark within 12 months. Crypto bulls however are quick to point out that the 2017 rally was driven by retail speculation whilst the 2020 performance is a result of institutional investment with a view to holding long-term.
The cryptocurrency train has seen many more jump on board over the course of the year, with a number of one-time skeptics now backing digital currencies as a viable option. There still remain many non-believers though, most notably investing guru Warren Buffet, who has described crypto trading as a form of gambling.