Digital currency has a market value north of $ 500 billion. Do you think Bitcoin is just a fad? It’s worth more than Visa (V) or MasterCard (ME). Or Walmart (WMT).
Bitcoin passed $ 20,000 for the first time just 11 days ago. Now he’s knocking on the door for $ 30,000.
Its rapid growth has been remarkable – or insane, depending on the appetite for risk. But there is some logic in the preliminary period: investors are investing money in bitcoin and other cryptocurrencies during the Covid-19 pandemic, as the Federal Reserve has sent interest rates close to zero (and is expected to keep them there for a few more years), severely weakening the dollar American.
That makes bitcoin, by comparison, an attractive currency. There is a set limit for the number of bitcoin on the planet, and investors believe that with the depletion of supply, the value of digital currency can only increase.
It also helps with the growing valuation of bitcoin: large, branded investors store it and huge consumer companies embrace it. This means adding a dose of validity and attractiveness to cryptocurrencies for major investors. For example, a top executive at Black stone (BLK) recently said cryptocurrency can replace gold and Square (ff) and PayPal (PYPL) we both hugged bitcoin.
As bitcoin rises to historic highs, cryptocurrency brokerage Coinbase, the most prominent cryptocurrency exchange, has signaled its intention to go public.
However, the recent rise of cryptocurrencies is showing signs of melting – excess enthusiasm fueled by the fear of losing, not just the fundamentals of the market. Take Elon Musk’s sarcastic tweet about rival Bitcoin Dogecoin last week: digital currency, which was built as a parody of cryptocurrencies, rose 20% immediately after Musk threw his support on Twitter.
Anhony Scaramucci, the founder of Skybridge Capital, has a big stake in bitcoin, but even he says people need to be careful. He told CNN Business earlier this month that it could be a solid addition to the average investor’s portfolio – but you have to have the stomach for it.
On CNN Business’s live show “Markets Now” earlier this month, Scaramucci said people have begun to accept bitcoin – and since it appears in so few portfolios, it has enough room to grow. However, bitcoin is a volatile asset and will be a risky holding if you invest in it.
“This tends to collapse,” he said. “A correction is due, and these corrections can be violent.”
Scaramucci said bitcoin could fall sharply from 20% to 50%.
“You have to be very careful,” he added.
But he also pointed out the power of bitcoin over the past decade: if you took $ 1 and put 99 cents into it in cash and a penny in bitcoin, the investment strategy would have exceeded $ 1 invested S&P 500 (SPX) In the last 10 years, he remarked.
“Bitcoin’s best days are ahead of it, but it will be volatile and I think people need to be prepared for that,” Scaramucci told CNN Business.
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