The digital currency has a market value of $ 500 billion. Do you think Bitcoin is just a fad? Worth more than Visa (V) or MasterCard (BAD). Or Walmart (WMT).
Bitcoin exceeded $ 20,000 for the first time just 11 days ago. Now you’re knocking on the $ 30,000 door.
Its rapid increase was remarkable – or insane, depending on your risk appetite. But there is some logic to this race: investors are pouring money into bitcoin and other cryptocurrencies during the Covid-19 pandemic, as the Federal Reserve raised interest rates to near zero (and hopes to keep them there for several years) , seriously weakening the US dollar.
This makes bitcoin, by comparison, an attractive currency. There is a defined limit to the number of bitcoins on the planet, and investors believe that when the stock runs out, the value of the digital currency can only increase.
Also helping in the growing appreciation of bitcoin: big brand investors are making a stock and big consumer companies are adopting it. This is adding a dose of validity and appeal to cryptocurrency to mainstream investors. For example, a senior executive in Black stone (BLK) recently said that cryptocurrency can replace gold, and Square (SQ) and PayPal (PYPL) both embraced bitcoin.
As bitcoin reaches historic levels, cryptocurrency broker Coinbase, the most important cryptocurrency exchange, has signaled its intention to go public.
Still, the recent rise in cryptocurrency is showing signs of melting – excess enthusiasm fueled by fear of losing, not just the fundamentals of the market. See Elon Musk’s sarcastic tweet about bitcoin rival Dogecoin last week: the digital currency, which was built as a parody of the cryptocurrency, shot up 20% immediately after Musk gave his support on Twitter.
Anhony Scaramucci, founder of Skybridge Capital, has a large stake in bitcoin, but even he says people need to be on the lookout. He told CNN Business earlier this month that it could be a solid addition to the average investor’s portfolio – but you need to have the stomach for it.
On CNN Business’s “Markets Now” live show earlier this month, Scaramucci said people have started to accept bitcoin – and as it appears in so few portfolios, it has a lot of room to grow. Still, bitcoin is a volatile asset and will be a risky property if you invest in it.
“This thing has a tendency to fall,” he said. “Correction is needed, and these corrections can be violent.”
Scaramucci said bitcoin could drop suddenly by 20% to 50%.
“You have to be very cautious,” he added.
But he also highlighted the staying power of bitcoin over the past decade: if you took $ 1 and put 99 cents in cash and one cent in bitcoin, that investment strategy would have exceeded $ 1 invested in S&P 500 (SPX) over the past 10 years, he noted.
“The best days of Bitcoin are yet to come, but it will be volatile and I think people need to be prepared for that,” Scaramucci told CNN Business.
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