Bitcoin hits $ 1 trillion market cap, hits another record high

NEW YORK / LONDON (Reuters) – Bitcoin hit a market cap of $ 1 trillion as it hit a new all-time high on Friday, countering warnings from analysts that this is an ‘economic side show’ and poor hedging against falling prices actions.

The world’s most popular cryptocurrency has hit an all-time high above $ 54,000, setting it on track for a weekly jump of over 11%. It has jumped around 64% so far this month and was last up 5.5% to $ 54,405.

BitcoinThe company’s gains have been fueled by signs that it is increasingly accepted by investors and mainstream businesses, from Tesla and Mastercard to BNY Mellon.

All digital coins combined have a market capitalization of approximately $ 1.7 trillion.

“If you really think there is a store of value in Bitcoin, then there are still a lot of benefits, ”said John Wu, president of AVA Labs, an open source platform for building financial applications using blockchain technology.

“If you look at gold, it has a market cap of $ 9 trillion or $ 10 trillion. Even if Bitcoin reached half of the market cap of gold, this growth still 4X, or $ 200,000. So I don’t know when that will stop going up, ”he added.

Yet many analysts and investors remain skeptical about the unevenly regulated and highly volatile digital asset, which is little used for trading.

JP Morgan analysts said BitcoinCurrent prices were well above fair value estimates. Mainstream adoption is increasing BitcoinThe correlation between cyclical assets and cyclical assets, which rise and fall with economic changes, in turn reduces the benefits of diversifying into crypto, the investment bank said in a note.

“Crypto assets continue to rank as the poorest hedge against major stock declines, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets increase with the ‘integration of crypto ownership,’ said JP Morgan.

Bitcoin is an “economic side show,” he added, calling innovation in fintech and the growth of digital platforms in credit and payments “the true story of financial transformation in the COVID-19 era.”

Other investors said this week BitcoinThe volatility of the company represents an obstacle for it to become a popular means of payment.

Tesla boss Elon Musk – whose tweets fueled Thursday BitcoinThe rally – said owning the digital coin was only a little better than holding the cash. He also defended Tesla’s recent purchase of $ 1.5 billion of Bitcoin, which sparked general interest in digital currency.

Bitcoin Proponents claim that cryptocurrency is a ‘digital gold’ that can hedge against the risk of inflation triggered by massive central bank and government stimulus packages designed to counter COVID-19.

Again Bitcoin would need to increase to $ 146,000 in the long run for its market cap to equal the total private sector investment in gold through exchange-traded funds or bullion and coins, according to JP Morgan.

Rival cryptocurrency ether traded down 0.3% to $ 1,934.67, still close to a record high of $ 1951 reached earlier on Friday. It was raised by growing institutional interest after the launch of its futures contracts on the Chicago Mercantile Exchange.

(Reporting by Gertrude Chavez-Dreyfuss in New York and Tom Wilson in London; editing by Dan Grebler)