Bitcoin rebounds to top $40,000
By Claire Hunte
13:56, 20 May 2021
Underscoring its volatility, Bitcoin rallied on Thursday, recovering its losses to climb above the $40,000 mark after plunging 30% on Wednesday – a reminder to investors that the asset class is a wild ride.
Bitcoin and other digital coins all regained losses. The benchmark coin rose 17% to $41,788 on Thursday, while Ethereum climbed 16.79% to $2,913.30 and joke coin Dogecoin jumped 22% to $0.413.
Cryptocurrencies went into a tailspin after a confluence of events that included Elon Musk’s Twitter remarks, China’s effective ban on digital currencies and signs that institutional interest may be on the wane.
Pricking investor enthusiasm?
These events certainly dampened investor ardor, with new entrants making an exit and the suggestion that others may be unwinding leveraged positions. CNBC’s Jon Fortt opined: “The bull case for Bitcoin is that it is the standard bearer for a new model of decentralised central transactions. It’s a needed piece of the future of digital finance. That’s why institutions have bought it. Changing the way that money works is messy. If you believe that the world is moving to a blockchain future, you know this volatility is inevitable.”
However, the inevitable price volatility “stemming from speculative demand”, according to the Bank of Canada, is a key barrier to the wide acceptance of cryptoassets as a means of payment. The central bank in its annual Financial System Review said it was monitoring the rapid evolution of the cryptoasset market, describing it as “an emerging vulnerability”.
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Big in popularity, small in footprint as an asset class
Citing the increasing popularity of cryptoassets, which grew from $200bn at the start of 2020 to $2trn in May 2021, and the wider access to Bitcoin, Ethereum and other digital coins by Canadian investors through crypto exchange-traded funds, closed-end funds and listed companies, the bank said they “continue to be considered high risk, because their intrinsic value is hard to establish”.
However, in spite of their growing popularity, the cryptoasset market is still small relative to the rest of the financial market and “not of systemic importance in Canada, neither as an asset class nor as a payment instrument”, the report declared. But this could change, it said, if a “large technology firm – a so-called Big Tech – with a sizeable user base decided to issue a cryptocurrency that became widely accepted as a means of payment.”
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