Bitcoin’s surge to the stratosphere continues, helping push the market capitalization for cryptocurrencies above $1 trillion, according to research firm CoinGecko.
Thanks to bitcoin, that total has soared almost fivefold over the past year. Bitcoin recently traded at $38,754, up 3.2%, and has ascended 394% in the past year. That puts its market cap at about $720 billion.
A slew of market pros are going gaga over bitcoin. On the same day in December that bitcoin hit $20,000, Scott Minerd, chief investment officer at Guggenheim Investments, told Bloomberg that the Federal Reserve’s “rampant money printing” should ultimately push bitcoin to $400,000.
And JPMorgan Chase analysts said this week that $146,000 may be possible.
But critics remind investors that while many people call bitcoin a digital currency, it doesn’t meet the basic requirement of a currency. It’s barely used as a medium of exchange for legitimate commerce.
Bitcoin bulls say it will benefit from its scarcity. For now there’s a limit of 21 million bitcoin that can be mined, and 18.5 million already are in circulation.
But this scarcity also leads to volatile trading. Bitcoin has plunged several times since it was introduced in 2009.
Bitcoin advocates are convinced that it’s a store of value, but it’s a store of value only because people think it is. If investors/speculators lose their confidence in the asset, it could crater.
The bitcoin crowd also says that it serves as a hedge against inflation and against declines in other financial assets, such as stocks, bonds and currencies. But this idea hasn’t been proven.
So caveat emptor — buyer beware.
