Bitcoin and ether hit record peaks on Tuesday, with enthusiasm for cryptocurrency adoption and worry about inflation driving momentum and flows into the asset class.
Though both virtual currencies pulled back from their highs in the U.S. session, their trajectory was clearly headed higher.
Bitcoin rose as high as US$68,564.40 and was last down 0.1 per cent at US$67,325 while ether, the second-biggest cryptocurrency by market value, earlier hit US$4,842.65 before trading down 0.7 per cent at US$4,774.
Both have more than doubled since June and added nearly 70 per cent against the dollar since the start of October.
“This move is a culmination of months of net outflows from exchanges and coming off the market, coupled with increasing demand,” said Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT.
“This creates a supply shock and we are far from levels where long-term holders, who make up a greater number of investors, start taking significant profits so $100,000 is on the horizon,” she added.
Market momentum has been gathering since last month’s launch of a futures-based bitcoin exchange-traded fund in the United States raised expectations of flow-driven gains.
Inflows into bitcoin products and funds have hit a record US$6.4 billion so far this year, data from digital asset manager CoinShares showed, and totaled US$95 million last week.
Huge pandemic savings and a more upbeat global growth prospects suggested that digital assets would remain well-supported, analysts said.
'WHERE THE FAST MONEY IS'
Other pieces of positive news have also helped, including plans by Grayscale, the world’s largest digital currency manager, to convert its flagship bitcoin trust into a spot-bitcoin exchange traded fund. Last week Grayscale also applied to list a “future of finance” fund that would track companies involved in the growing digital economy.
“Crypto is where the fast money is at,” said Chris Weston, head of research at brokerage Pepperstone. “(Ether) is trending like a dream and I’d be long and strong here,” he added.
“Clients are net long, with 79% of open positions held long, and I can sense the $5k party could get going soon.”
Others though flagged cause for some near-term caution on bitcoin, however, as the cost of funding long positions has crept higher in recent days, according to trading platform BitMEX – sometimes a precursor to a pullback.
Still, the moves so far have carried the token more than 1,680 per cent higher from its March 2020 lows and helped lift the total market capitalisation of cryptocurrencies above US$3 trillion, according to crypto price and data aggregator CoinGecko.
CoinMarketCap put it slightly lower at $2.93 trillion. Either way true believers, or “hodlers” in crypto markets terminology, have felt vindicated and remain bullish.
“They threw everything at the beast and still it moves,” said payments strategist and sometimes host of the Around the Coin podcast, Brian Roemmele, on Twitter. “Next stop: #Bitcoin $72000.”
(Reporting by Tom Westbrook in Sydney and Gertrude Chavez-Dreyfuss in New York; Editing by Rosalba O’Brien, Lincoln Feast, Muralikumar Anantharaman)