Bitcoin\u2019s market value reached $1 trillion for the first time, a surge that\u2019s helping cryptocurrency returns far outstrip the performance of more traditional assets like stocks and gold.<\/p>\n
The largest digital-asset has added more than $450 billion of value in 2021 to more than $1 trillion, data compiled by Bloomberg show. The Bloomberg Galaxy Crypto Index, which includes Bitcoin and four other coins, has more than doubled.<\/p>\n
Speculators, corporate treasurers and institutional investors are thought to have stoked Bitcoin\u2019s volatile ascent.<\/p>\n
Crypto believers are duelling with sceptics for the dominant narrative around the climb: the former see an asset being embraced for its ability to hedge risks such as inflation, while the latter sense a precarious mania riding atop waves of monetary and fiscal stimulus.<\/p>\n
At the same time, the argument has been made that assigning a market capitalization isn\u2019t an accurate representation since Bitcoin isn\u2019t a company or even an asset. Sceptics say without real-world assets that companies possess or government backing like the dollar, all investors are really buying into is faith in the cryptocurrency\u2019s network.<\/p>\n
Still, FOMO \u2014 fear of missing out \u2014 may be at play, said Shane Oliver, head of investment strategy with AMP Capital Investors Ltd. in Sydney, adding that \u201cin times of easy money this gets magnified and it\u2019s partly what\u2019s driving the current interest.\u201d<\/p>\n
The crypto index\u2019s performance towers over stocks, gold, commodities and bonds in 2021.<\/p>\n
This month, Tesla Inc. disclosed a $1.5 billion investment and MicroStrategy Inc. boosted a sale of convertible bonds to $900 million to buy even more of the token. That brought the coin closer to corporate America.<\/p>\n
\u201cIf companies\u2019 fundamentals are going to become closely tied to movements in Bitcoin because they\u2019ve suddenly become speculators on the side, we\u2019re going to be in bubble territory before you know it,\u201d said Craig Erlam, senior market analyst with Oanda Europe Ltd.<\/p>\n
Tesla Chief Executive Officer Elon Musk posted a somewhat cryptic tweet Friday that appeared in part to defend the company\u2019s action, saying Bitcoin \u201cis simply a less dumb form of liquidity than cash\u201d while adding that the electric vehicle maker\u2019s decision isn\u2019t \u201cdirectly reflective of my opinion.\u201d<\/p>\n
The \u201clong Bitcoin\u201d trade is seen as among the most crowded in the world alongside technology exposure and dollar shorts, according to the February edition of Bank of America\u2019s global fund manager survey.<\/p>\n
AMP\u2019s Oliver said if Bitcoin \u201cfalls out of favour \u2014 for example, due to government regulation or investors just moving on to the next new thing \u2014 then it could quickly plunge.\u201d<\/p>\n