Bitcoin traded above $11,000 for the first time in 15 months, recouping more than half of the parabolic increase that captured the attention of mainstream investors.
The largest cryptocurrency had a furious run higher in late 2017 that culminated with a top above $19,500, before an almost-as-relentless move downward over much of 2018. It languished around the $3,300 to $4,100 range for several months. Bitcoin’s ride back accelerated in April. Bitcoin has risen in value by almost $2,000 in the week since the US technology firm revealed plans to create a cryptocurrency called Libra.
The catalyst of new cryptocurrency
The original cryptocurrency had languished below $6,000 for much of this year and was falling out of the headlines as investors around the world gradually lost interest in the fad for digital assets.
Nevertheless, the cryptocurrency is now rallying as mainstream players from both finance and technology begin to demonstrate confidence in the technology, and – as predicted – Facebook’s announcement of its Libra cryptocurrency has become the latest sign that the technology is here to stay, driving investment in bitcoin upwards.
Called Libra, the new currency will launch as soon as next year and be what’s known as a stable coin–a digital currency that’s supported by established government- backed currencies and securities. The goal is to avoid massive fluctuations in value so Libra can be used for everyday transactions across Facebook in a way that more volatile cryptocurrencies, like Bitcoin, haven’t been.
Rising tensions in the world
On the other hand, Gold prices have risen in recent week to the highest levels since 2013, as the US Federal Reserve could be forced into interest rate cuts to stave off a slowdown in the US economy. The European Central Bank has also said it could cut interest rates as growth falters in the Eurozone.
Middle east and mounting fears about the world economy have also stoked renewed interest among investors in bitcoin, which is sometimes viewed as a safe-haven asset similar to gold. The digital currency does not typically mirror the movements in wider financial markets during periods of turmoil.
What is the future
Regulators around the world have warned that Facebook’s entry into the world of cryptocurrencies could lead to greater controls and tougher regulations to protect consumers.
However, Mark Carney, the governor of the Bank of England, gave a cautious welcome to Libra last week. He said the central bank would support new entrants into the UK financial system, but warned that Facebook would need to meet the highest regulatory standards.
We continue to view speculation in specific cryptocurrencies as a gamble and not an investment. Next-generation payment systems should be an opportunity until regulators open the green light.