REUTERS / Dado Ruvic / Illustration
- Bitcoin rose 7.5% on Thursday to $ 40,094.81.
- Red-hot cryptocurrency has seen immense volatility in recent days, with thousands of dollars per currency added and eliminated in short periods.
- Thursday’s rise comes after European Central Bank chief Christine Lagarde called for more regulation the day before.
- Morgan Stanley analysts say bitcoin’s focus is “not surprising”, given the low bond yields
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Bitcoin rose sharply again on Wednesday night and Thursday morning, past the $ 40,000 mark.
It has been a volatile few weeks for bitcoin, with its price reaching a historic high of close to $ 42,000 last week, before falling. The price has fluctuated consistently around 10% a day, as investors buy and withdraw money from the cryptocurrency, which has increased by more than 330% in one year.
Bitcoin was up 7.5% to $ 40,094.81. Its smaller rival, Ethereum, rose 7.2% in 24 hours to $ 1,160.
The dramatic rise in the price of bitcoin and other cryptocurrencies has drastically divided market opinion, opposing much – but not all – of the financial establishment to a new generation of online investors.
On Wednesday, the head of the European Central Bank, Lagarde, said that Bitcoin needs to be regulated globally and linked to “totally reprehensible money laundering”.
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She said that bitcoin is not a currency, as many of its proponents argue, but “a highly speculative asset that has spawned some funny deals”.
Bambos Tsiattalou, a lawyer specializing in financial crimes at Stokoe Partnership Solicitors in London, said that stricter regulation would be a major problem for cryptocurrencies.
“Many people buy Bitcoin and other cryptocurrencies because they are concerned and don’t trust fiat currencies,” so broader regulation would destroy much of its appeal, he said.
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Even so, despite the eyebrows of regulators and central banks, the rising price has prompted some institutional investors to buy.
Analysts at Morgan Stanley said in a note: “With the dollar falling sharply, profoundly negative real yields and continuing political uncertainty, investors have been looking for alternatives to traditional cash deposits.”
They added: “Innovation in digital assets continues rapidly and is likely to lead to an increase in
institutional participation over time. “
Still, analysts warned that “the perception of ‘value’ and demand may vary materially, for example, due to changes in regulations.”
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