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Bitcoin hopes of record value dashed after cryptocurrency falls again

Written by on 26/11/2020

Bitcoin fell 8.7% on Wednesday – just as it neared its highest-ever price – passing $19,000 (£14,241) for the first time since its 2017 collapse.

It was joined by other cryptocurrencies in the drop, all of which had been buoyed in recent weeks by strong demand from institutional investors.

Despite the losses, Bitcoin – which remains the most valuable and popular digital currency – has increased its value by more than 100% this year.

Some hedge fund managers have suggested it could hit $100,000 (£75,000) in 2021.

Brian Estes, a chief investment manager at Off The Chain Capital, said: “I have seen Bitcoin go up 10x, 20x, 30x in a year. So going up 5x is not a big deal.”

Others have warned such predictions are outlandish.

Kevin Muir, a trader based in Canada, said: “Any hedge fund model on Bitcoin is rubbish. You can’t model a mania. Is it plausible? For sure. It’s a mania. But does anyone actually have a clue? Not a chance.”

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Bank of England Governor Andrew Bailey recently said he was “very nervous” about people using Bitcoin to make payments.

He has also warned that people who invest in the cryptocurrency should be prepared to “lose all their money”.

The highly volatile digital asset set a record high of $20,089 (£15,062) in December 2017.

However, in the year that followed its value plummeted more than 80% to $3,200 (£2,400).

A Sky News investigation found the fall led to businesses collapsing, marriages failing, and some investors defaulting on their mortgages.

Bitcoin was billed as a peer-to-peer electronic cash system when it was unveiled in a white paper in 2008, not long after the financial crash.

The document was written by a person or group using the pseudonym Satoshi Nakamoto, but their identity remains unknown.

Bitcoin has a maximum supply of 21 million coins that will gradually be released between now and 2140, and fractions of them can be traded.

Some have suggested this capped supply has contributed to recent rises as central banks turn to quantitative easing in light of the coronavirus pandemic, which effectively involves printing new money.

The fact that Bitcoin is traded peer-to-peer at a value determined by the market rather than by a central bank has captured the imagination of economic libertarians, as well as criminals seeking to evade law enforcement.

 Sky News

© Sky News 2020

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