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It just passed US $ 28,000 (AU $ 36,800) and shows no signs of stopping.

In December, Bitcoin has a market value north of $ 500 billion.
In December, Bitcoin has a market value north of $ 500 billion. (Sitthixay Ditthavong)

Do you think Bitcoin is just a fad? It is worth more than Visa or Mastercard. Or Walmart.

You are now knocking on the $ 30,000 door.

Its rapid rise has been remarkable, or insane, depending on your appetite for risk.

But there’s some logic in the run-up: Investors are pouring money into Bitcoin and other cryptocurrencies during the COVID-19 pandemic, as the US Federal Reserve sent interest rates close to zero (and hopes to keep them there. for several more years), severely weakening. The U.S. dollar.

That makes Bitcoin, comparatively, an attractive currency.

There is a limit set to the amount of Bitcoins on the planet, and investors believe that once the supply is depleted, the value of the digital currency can only increase.

It also helps in the skyrocketing valuation of Bitcoin – big name brand investors are hoarding it, and big consumer companies are embracing it.

That adds a dose of validity and attractiveness to the cryptocurrency for major investors.

A graph showing the increase in the value of Bitcoin during 2020.
A graph showing the increase in the value of Bitcoin during 2020. (coin desk)

For example, a top executive at BlackRock recently said that cryptocurrency can replace gold, and Square and PayPal have embraced Bitcoin.

As Bitcoin rises to all-time highs, cryptocurrency brokerage Coinbase, the most prominent cryptocurrency exchange, has signaled its intention to go public.

Still, the recent rise in cryptocurrencies is showing signs of a meltdown, an over-enthusiasm fueled by fear of missing out, not simply market fundamentals.

Take Elon Musk’s sarcastic tweet about Bitcoin’s rival Dogecoin last week: The digital currency, which was itself constructed as a parody of the cryptocurrency, spiked 20 percent immediately after Musk endorsed it in Twitter

Anthony Scaramucci, founder of Skybridge Capital, has a large stake in Bitcoin, but even he says that people should be careful.

He told CNN Business earlier this month that he could be a solid addition to the average investor portfolio, but he must have the stomach for it.

On CNN Business’ Markets now Live show earlier this month, Scaramucci said that people have started accepting Bitcoin and since it appears in so few wallets, it has plenty of room to grow.

Still, Bitcoin is a volatile asset and it will be a risky holding if you invest in it.

“This has a tendency to collapse,” he said.

“It is due to a correction, and these corrections can be violent.”

Scaramucci said that Bitcoin could suddenly drop between 20% and 50%.

“You have to be very cautious,” he added.

But he also highlighted the staying power of bitcoin over the course of the last decade: If you took $ 1 and put 99 cents in cash and a penny in bitcoin, that investment strategy would have outperformed the $ 1 return invested in the S&P 500 during the last 10 years. , He noticed.

“The best days for Bitcoin are ahead, but it’s going to be volatile and I think people should be prepared for it,” said Scaramucci.

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