Is This Bitcoin Rally Another Bubble or Does it Have More Room to Run?
Bitcoin is up more than 300 percent since March, but many are getting flashbacks of the crypto's rally in late 2017, according to CMEGroup.
The purpose of Bitcoin is still up for debate. It could be a store of value, a "risk-off" asset, or a fiat currency proxy. CME Group’s Global Head of Equity Index and Alternative Investment Products Tim McCourt believes that time will determine what Bitcoin truly is. “It’s a pioneer in the cryptocurrency space, it’s innovative with an 11-year track record,” he said.
Equities and commodities have rallied significantly since the sell-off earlier this year as well. However, when the rally took a temporary pause in early fall, Bitcoin took over and started surging. Bitcoin also has a significant reputation within cryptocurrencies and seems to be the bell cow. It is worth 66 percent of the total cryptocurrency market cap. “Bitcoin has the brand name and has been around the longest,” said Rene Van Kesteren, head of digital markets for Blockfi.
Even some famed investors such as Paul Tudor Jones and Stanley Druckenmiller have made public statements about Bitcoin. Druckenmiller recently stated that Bitcoin “has a lot of attraction as a store of value.”
The pandemic has increased the demand for stores of value due to uncertainty and increased risk. Furthermore, many investors are skeptical of the risks that global central banks are taking with their currencies. As a result, Bitcoin has become a hedge against currency risk.
In the future, it will be interesting to watch Bitcoin respond to increasing inflation rates as central banks attempt to quell the unprecedented moves they took to combat the economic impact of the pandemic.
However, for now, I agree with Tim McCourt that time will determine what Bitcoin truly is.