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Bitcoin spikes again as analysts declare end of ‘crypto winter’

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Cryptocurrencies, the asset class written off by most investors after enormous price falls last year, are back.

Bitcoin, the world’s largest digital asset by market capitalisation, jumped as much as 10 per cent to $8,942.58 on Monday, its highest level in a year, according to Bloomberg data. That takes its gains this year to about 140 per cent, including a near-70 per cent rise this month.

Among other digital assets, Litecoin’s rise of about 13 per cent on Monday has taken gains this year to more than 290 per cent. Ethereum, the second-largest cryptocurrency, was up almost 8 per cent on Monday and is up nearly 110 per cent this year.

The gains are reminiscent of some of the huge price rises seen during the cryptocurrency boom of late 2017. They make bitcoin and other cryptocurrencies some of the biggest beneficiaries of this year’s rally in riskier assets, which has been fuelled by signs of yet more loose monetary policy from the Federal Reserve and European Central Bank.

The surprise revival comes after a painful 2018 in which bitcoin slumped by almost three-quarters, while many hedge funds investing in cryptocurrencies posted huge losses and some shut up shop.

“A lot of people thought that crypto has gone, that’s it,” said Manuel Ernesto De Luque Muntaner, founder and chief executive of Luxembourg-based Block Asset Management, which invests in blockchain and cryptocurrency funds.

“The crypto winter is gone,” he added, saying that demand from institutional buyers and venture capital funds had helped fuel the rebound in prices this year.

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Website 99bitcoins, which collects quotes from commentators predicting the demise of the digital currency, recorded 93 bitcoin “obituaries” last year, and a total of 359 since December 2010.

But this year there are signs of growing interest in cryptocurrencies and blockchain technologies among institutional investors and big corporations. Facebook, for instance, is looking to create a new digital currency, while JPMorgan Chase has unveiled plans to allow corporate clients to transfer “JPM Coins” between accounts over a blockchain.

This year’s rally has taken the total market capitalisation of cryptocurrencies to nearly $270bn, according to website Coinmarketcap.com, of which bitcoin accounts for 57 per cent.

“When demand starts to pick up, there is no offsetting rise in supply that can dampen the price rise,” said Caitlin Long, a former Morgan Stanley banker who is now part of the Wyoming Blockchain Task Force. “There isn’t a central bank to expand or contract its balance sheet as the price moves.”

The total number of crypto accounts registered by Blockchain, a wallet provider, has been rising at a fairly steady pace in recent years, including even during last year’s sell-off. However, growing interest has seen that rise at a slightly faster pace over the past month to more than 38m, according to the company.

Even so, there is still some way to go before cryptocurrencies are back near peak prices. Bitcoin, for instance, remains 53 per cent down from its record high of almost $20,000 in December 2017.

laurence.fletcher@ft.com



Via Financial Times

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