Bitcoin price hits US$28,000 mark

Kevin Xu and Reuters

A rally in the price of bitcoins is continuing, with the digital currency hitting the US$28,000 (HK$218,400) mark yesterday, according to cryptocurrency platform CoinDesk.

The cryptocurrency was up 14.08 percent at US$28,301.09 as of 7.23pm, with a market capitalization of US$525.89 billion, before settling down around US$27,000. It has gained more than 270 percent this year.

This year's rally has also been driven by increasing expectations that bitcoins will become a mainstream payment method, with PayPal opening its network to cryptocurrencies.

With the supply of bitcoins capped at 21 million, investors see in the cryptocurrency a hedge against the risk of inflation as governments and central banks turn on the stimulus taps in response to the Covid-19 pandemic.

Cryptocurrencies emerged over a decade ago but quickly became associated with crime, trading glitches, hacks and wild price swings.

It is only in the past few years that they have started attracting more mainstream interest.

Bitcoin remains less regulated than most traditional assets, but institutional investors have begun to shed skepticism toward cryptocurrencies as better market infrastructure makes crypto markets more accessible. Still, few people or businesses use bitcoin for commerce.

After touching a record high just under US$20,000 late last month, bitcoin stalled and even went below US$17,000, stoking fears that it would be a repeat of the asset's collapse in 2018.

Glassnode, which provides insight on blockchain data, said long-term holders of bitcoin had been selling the virtual currency after it reached the November record peak.

It noted, however, that this was overall a long-term bullish signal rooted in previous price trends.

British fund manager Ruffer Investment Management last month made a bet on bitcoin now worth around 550 million (HK$5.8 billion), a spokesman for the company said, in one of the largest signals of rising institutional interest in the digital currency this year.

And hedge fund giant One River Digital Asset Management has invested more than US$600 million in cryptocurrencies, according to a Bloomberg report.