INSUBCONTINENT EXCLUSIVE:
Is it an inflation hedge? A currency? Or just another niche asset to take a punt on? Bitcoin is in the headlines, re-kindling a debate over
its true role and the drivers behind its latest scintillating rally
Bitcoin, with a history of vertiginous ascents and steep drops, is close to taking out its record peak of near $20,000, having climbed
taps to combat the damage from the COVID-19 pandemic, plentiful liquidity has lifted assets from emerging currencies and junk bonds to
bitcoin and stocks.Assets under management (AUM) at Grayscale, the world's largest digital currency manager, have soared to a record $10.4
Its bitcoin fund is up 85 per cent
More broadly, high savings rates have sent money flooding into investment funds, potentially sparking interest in bitcoin as a portfolio
diversifier.JPMorgan analyst Nikolaos Panigirtzoglou says there are signs of family offices, which manage money for wealthy people,
safeguard against inflation - with supply capped at 21 million, its scarcity gives it an innate value.Some who buy gold to hedge inflation
risk may be turning to crypto, JPM's Panigirtozoglou said, adding: "There is a reassessment of bitcoin about its value here as an
alternative currency, as an alternative to gold." But bitcoin's rise outstrips gold's gains of 20% or so, while an inflation-linked
government bonds index is up 4 per cent
And its rally has sped up in recent weeks even as gold has flatlined, and the resurgent pandemic makes a growth and inflation recovery a
distant prospect.Part of the gains may be due to growing acceptance of bitcoin as a payments system and by a broader range of investors
Bitcoin has jumped by half since PayPal said last month it would open its network to cryptocurrencies, meaning users could spend bitcoin at
its 26 million merchants.
That fanned hopes it could catch on as a way to pay.Traders who say there is more participation by bigger investors point to lower levels of
volatility than during the 2017 bubble
Ten-day price swings against the dollar between end-June and mid-November - a period when bitcoin prices nearly doubled - were well under
"It's still largely retail, but it's becoming more efficient, mature, and I see more professional participants," said Andrea Leccese of
crypto fund Bluesky Capital.
