Bitcoin reached $5000, all-time high

8 years ago - Published in Finance, Fintech Land, Technical Analysis

Bitcoin smashed through the $5,000 barrier for the first time on Thursday, jumping as much as 8 percent on the day as investors shrugged off the latest warnings on the risks of buying into the booming cryptocurrency market. Less than a month ago, BTC/USD was trading below $3000 for a while, following a crash from $4980.

Bitcoin, the biggest and best-known cryptocurrency, has chalked up a more than fivefold increase in price this year.

Typically for bitcoin, which at less than nine years old, is still highly volatile and illiquid compared with traditional currencies and assets, the precise reason for its recent tear was unclear.

But the main factor could simply be demand from investors wanting 'in' on a market that has provided gains exceeding those of any other currency in every year bar one since 2010.

"People are just wanting to be part of it," said Ryan Nettles, head of FX trading and market strategy at Swiss bank Swissquote, which launched bitcoin trading two months ago. Nettles said interest had been much higher than anticipated and has come from banks, hedge funds and brokers. "The interest really stems from the media hype," he added.

Data released last week from SEMrush, a search engine data analytics firm, found the price had a 91 percent correlation with Google searches on bitcoin, suggesting that all news — whether negative or positive — drives up demand, even if bad news can have a temporary negative effect.

Bitcoin almost reached $5,000 at the start of September, but fell back sharply. First, Jamie Dimon, CEO of J.P. Morgan Chase & Co., said the cryptocurrency is a “fraud“. Then, Ray Dalio, founder of one of the world’s largest hedge funds, called it a bubble. 

Russian President Vladimir Putin said on Tuesday that "buyers of cryptocurrencies could be involved in unlawful activities," according to a Reuters report. Russia's central bank also said it would block websites of exchanges that are offering cryptocurrencies.

But that was not enough to put investors off, with bitcoin rallying around 10 percent since then.

Last month, Chinese regulators banned cryptocurrency exchanges with some of the largest in the country shutting down operations. The government also banned initial coin offerings (ICOs), a way for cryptocurrency start-ups to raise money through issuing tokens.