Bitcoin hits $1 trillion market value to all-time peak

NEW YORK: The price of bitcoin crossed another major milestone as the cryptocurrency surpassed market capitalization of $1 trillion to set another record.

The world’s most popular cryptocurrency jumped to an all-time high of $56,399.99, posting a weekly gain of 14%. It has surged nearly 70% so far this month and was last up 8% at $55,664.

Bitcoin’s gains have been fueled by signs it is gaining acceptance among mainstream investors and companies from Tesla and Mastercard to BNY Mellon. All digital coins combined have a market cap of around $1.7 trillion.

The cryptocurrency’s 60% surge this month has outperformed by far the growth of traditional assets from stocks to gold. The cryptocurrency has added more than $415 billion of value this year alone.

The cryptocurrency now joins a rarified trillion-dollar market capitalization club with the likes of Amazon, Microsoft, Apple, and Alphabet. Market analysts have long criticized the cryptocurrency’s price volatility and rapid ascent. Many fear it’s a bubble waiting to burst.

Analysts at JPMorgan said have pointed to the fluctuating price of bitcoin as a problem. They said bitcoin was far more volatile than gold, which has often been pitted against the cryptocurrency.

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The investment bank said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into cryptocurrency.

“Crypto-assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” JP Morgan said.

Bitcoin is an “economic side show,” it added, calling innovation in financial technology and the growth of digital platforms into credit and payments “the real financial transformational story of the COVID-19 era.”

Bitcoin proponents argue the cryptocurrency is “digital gold” that can hedge against the risk of inflation sparked by massive central bank and government stimulus packages designed to counter COVID-19.

Yet bitcoin would need to rise to $146,000 in the long-term for its market cap to equal the total private-sector investment in gold via exchange-traded funds or bars and coins, according to JP Morgan.