The digital coin's price peaked in late 2017, reaching US$20,000 per coin, but plummeted the following year and entered into what experts describe as a "crypto winter". Even American investment giant Fidelity's announcement that it had set up a crypto arm to make it easier for its clients to trade digital coins in August barely moved the needle.
Gavin Brown, senior lecturer in financial technology at Liverpool University, says the "lower for longer" monetary policy being adopted by central banks across the world may be a factor. This means the hunt for yield is more difficult across typical assets.
Record levels of debt burden for both individuals and countries, coupled with the pandemic has pushed banks into quantitative easing - devaluing fiat currency.
"Bitcoin does not suffer from this as its supply is precoded," Brown says. "There are presently 19 million Bitcoins in existence with a maximum total supply once all Bitcoins have been created of 21 million - that's one Bitcoin for every 371 people on the planet. Such scarcity of supply becomes more appealing in the context of increasing rates of quantitative easing".
Another reason for the sharp spike may be down to an alleged leaked report that appeared on Twitter on November 13. The report, shared in screen grabs with the official Citibank header template, appeared to have been written by Tom Fitzpatrick, a former foreign currency technician and Citibank managing director.
In it Fitzpatrick claims that Bitcoin may peak at US$381,000 in 2021. The report compares gold and Bitcoin based on historical inflation and fiat devaluation. A Citibank spokesman was unavailable to confirm the authenticity of the report.
Meanwhile, the US election may have also played a part in the coin's surge. An incoming senator for Wyoming, Cynthia Lummis is the first senator to own Bitcoin. The Democrat bought the coin back in 2013 after a tip from her son-in-law. She is expected to advocate for cryptocurrency.
Sceptics' positions have yet to change, however. Ray Dalio, the founder of Bridgewater Associates, penned a Twitter thread denouncing its legitimacy as a long-standing alternative to currency.
"If it becomes successful enough to compete and be threatening enough to currencies that governments control, the governments will outlaw it and make it too dangerous to use," Dalio wrote.
After much criticism from cryptocurrency advocates, he was quick to point out that he would love to be corrected.
"I might be missing something," he said.
- Telegraph Media Group
