Laith Khalaf, head of investment analysis at AJ Bell, comments on Bitcoin’s latest surge:
“Bitcoin is now trading above $60,000 again, for the first time since the heady crypto days of 2021. It’s up over 40% this year and many people are putting this down to the launch of spot ETFs in the US, which were given the green light by the US regulator a few weeks ago. These are being offered by big fund providers like BlackRock, Fidelity and Invesco, and the theory is this is a big step into the mainstream for Bitcoin and crypto.
“There is some merit to this argument, as these regulated products offer convenient access to Bitcoin for US investors and they could be rolled out globally if successful. They also provide a regulatory halo over the cryptocurrency, something which has created concern amongst MPs in the UK. There has also been a wider risk rally this year, with technology stocks doing particularly well, and that suggests fertile ground for a Bitcoin bull rally.
“The question is how long this rally will last and whether Bitcoin will breach its all-time high. I suspect there could be further to run in Bitcoin’s current ascent, as its success tends to breed success in the short term. Breaching $60,000 will generate plenty of column inches and public attention, likely luring in new investors and creating an upward swirling vortex. But buying on the back of a price spike is rarely a good idea. Previous episodes have shown that those who get in when the frenzy peaks suffer extreme losses. From highs of over $60k in 2021 Bitcoin fell to around $17k last year. While it is now on the brink of regaining that lost ground, the long-term future of crypto still hangs in the balance.
“That’s because questions still remain over the long run adoption of crypto by consumers, businesses and investors. Its volatility doesn’t help cement its status as a currency, and while there may be an initial sugar rush to buy ETFs, institutional investors are likely to be pretty wary of including crypto in their portfolios. We’re also likely to see the widespread launch of Central Bank Digital Currencies in the coming years which could undermine the case for holding crypto.
“The ultimate outcomes are pretty binary for Bitcoin. Either it becomes an accepted part of the financial furniture and a valuable asset, or it ends up on the rubbish heap. The price volatility partly reflects the ongoing battle between these two possible and polarised visions of crypto’s future. It’s impossible to predict with a great degree of confidence which will prevail. As ever, investors looking to put money into bitcoin should be willing to lose it in its entirety in the worst case scenario.”
