The largest digital coin, which has more than doubled this year, rose as much as 2.4% to $17,099 on Tuesday in New York trading. From an all-time high in December 2017 of nearly $20,000, Bitcoin tumbled to as low as $3,136 within a year.
The digital money has endured plenty of wild price swings because it premiered in 2009.
But investors are flocking to cryptocurrencies during the pandemic-driven volatility on global stock markets.
Experts have cautioned about watching them as a “safe haven”.
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On Wednesday, Bitcoin had climbed more than 7% to $17,891, its highest level since December 2017.
Some analysts said that the Covid-19 pandemic has invited investors to reassess the long-term prognosis for Bitcoin along with other cryptocurrencies.
But there are still concerns about the fraudulent trading from cryptocurrencies after a succession of high profile hacks.
‘Bouncing like a yo-yo’
Through times of volatility, investors have a tendency to transfer their money from stocks and into which will be thought safer havens, like gold and cash.
Some believe cryptocurrencies are now being viewed as a refuge from stock exchange volatility.
“Covid-19 has disrupted the traditional safe-haven trade and gold’s inability to outperform. Periods of extreme risk aversion have forced many traders to diversify into Bitcoin,” explained Edward Moya, at trading company Oanda.
Fascination of Bitcoin is its own limited supply, which is capped at 21 million
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Some believe this scarcity supplies an innate value and protects Bitcoin out of inflation, which is becoming a worry.
But Shane Oliver, head of investment strategy and chief economist at AMP Capital, warned about jumping to Bitcoin.
“Its huge volatility hardly makes it a safe haven as a store of value. I have far more confidence in the $50 note in my wallet retaining its value over time than Bitcoin, which seems to bounce around like a yo-yo.”
Last month, PayPal announced that its clients are going to have the ability to get and market Bitcoin and cryptocurrencies with their PayPal accounts, allowing clients to purchase things from the 26 million vendors which take PayPal, it said.
PayPal intends to roll up buying choices in the US during the next few weeks, together with the complete rollout because early next year.
However, Oanda’s Mr. Moya warned traders to get ready for much more volatility.
“The number of hedge funds and high-frequency trading systems driving Bitcoin higher will likely deliver exaggerated moves once its price nears the $20,000 level,” he further added. “Traders need to expect $1,000 swings in a matter of minutes.”
Some believe the current rise in Bitcoin is partially driven by the”fear of missing out” (FOMO).
“Its rebound is creating more interest from speculators and so they are jumping in which then pushes it even higher,” added Mr. Oliver.
“I think most people would put more faith in a digital currency run by their government rather than one like Bitcoin that they have trouble understanding or explaining.”
China is just one such country working towards launch its very own government-backed digital money – called Digital Currency Electronic Payment (DCEP).
One trader, Jon Son, told the BBC:”I think more people are beginning to buy Bitcoin first not to miss the rise and then research into what exactly Bitcoin is.”
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