The bitcoin roller coaster continues.
The price of the top cryptocurrency hit an all-time high of nearly $42,000 less than a week ago before quickly falling back to around $30,000 — more than a 20% plunge. But it has roared back in recent days and is once again trading just shy of $40,000.The drastic shifts illustrate just how volatile bitcoin has become, and suggests that bitcoin (XBT) investors hold on tight for what could be a bumpy, if ultimately profitable, rise.
The cryptocurrency is clearly benefiting from recent weakness in the dollar and the expectation that the Federal Reserve will keep interest rates near zero for several more years. That confidence is bolstered by the fact that more mainstream financial institutions like BlackRock (BLK) are declaring bitcoin a 21st century version of gold.
The interest on the part of well-known investors and blue chip companies is one reason why bitcoin fans think the current rally differs from late 2017 — when prices rose to nearly $20,000 before crashing to around $3,500 just a year later.
Bumpy ride ahead but prices may keep climbing?
That is certainly the case. Some experts think bitcoin prices may have more room to run due to the Covid-19 crisis.
“Economic uncertainty from the pandemic has led to an influx of investors looking to safeguard assets from traditional market downfalls,” Don Guo, CEO of Broctagon Fintech Group, said in an email to CNN Business.
“As governments provide relief through monetary stimulus, investors are turning towards bitcoin to hedge against expected inflation,” Guo added.
Not everyone is convinced that the price can keep climbing.
Bitcoin’s recent price surge may be a classic case of an asset running up too far too fast. But as with the big dot coms such as Amazon (AMZN) in the late 1990s, long-term investors who hold on may ultimately be rewarded — assuming they can weather big dips along the way.
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