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This week in Bitcoin price: Jan 5 - 11

In just 24 hours, Bitcoin went from an all-time high of nearly $42,000 to losing almost a third of its value. Investors react to a week of dizzying volatility in our latest report.

Published on January 11th, 2020

The big picture

For the third week in a row, Bitcoin hit a new all-time high, breaking the $40,000 mark for the first time on January 7. But all-time highs aren’t the only story in a week that was also defined by market volatility: after reaching a peak of nearly $42,000 on January 8, prices quickly retreated back to around $32,000 (which is more or less where they began the week). The dizzying rise and precipitous decline — nearly 30% in the span of 24 hours — left investors split about whether potential rewards are worth enduring so much volatility.   

Key points

For its entire history, Bitcoin has been beset by the ever-present risk of price volatility. This week was a prime illustration, seeing prices hit all-time highs before sharply doubling back. Which leaves investors wondering whether Bitcoin’s price volatility is worth the potential opportunity? We got some insights this week from some of Bitcoin’s biggest institutional investors.  

  • New York-based Guggenheim Investment Partners — which recently announced intentions to buy as much as $530 million worth of Bitcoin — weighed in, with its chief investment officer noting: “Bitcoin’s parabolic rise is unsustainable in the near term.” (In late December, Guggenheim’s CIO also predicted that Bitcoin could eventually reach $400,000.)

  • Other institutional investors seemed to regard Bitcoin’s volatility as an opportunity. Fund manager Bill Miller told CNBC this week: “You have to expect that it’s going to be very, very volatile… If you can’t take the volatility, you probably shouldn’t own it. But its volatility is the price you pay for its performance.”

  • JP Morgan analysts, who recently said that Bitcoin could rise to $146,000 in the long term as it competes with gold, noted this week that “Bitcoin’s volatility would need to drop substantially before it can match gold in terms of market value.” 

  • In an op-ed for the Financial Times, the chairman of London-based Fulcrum Asset Management considered Bitcoin’s role alongside new digital currencies such as China’s digital yuan: “That still leaves a role for crypto as an investment vehicle and store of value. Can Bitcoin seriously compete with gold as a safe asset for the largest investors? History, regulation and market volatility make that seem improbable, but it is beginning to develop a more important role.”

Spotlight: Bitcoin vs. other major assets

At the time of writing, Bitcoin’s market capitalization hovered around $614 billion — making it the 11th most valuable asset in the world, surpassing Alibaba, China’s second largest company. Alibaba runs Alipay, a digital payments system used for billions of transactions. Notably, Bitcoin has not yet reached the market cap of either silver or gold, two historic stores of value that are worth $1.3 trillion and $11.7 trillion respectively. 

Is Bitcoin a viable payment platform or just a store of wealth?

The Economist dug into Bitcoin’s recent run this week and asked one of the big questions investors have been asking for years. Can Bitcoin become a viable payment platform, or is it mainly useful as a way of storing wealth? The magazine notes: “Bitcoin mania is rooted in the possibility that it might eventually offer a safe store of value — like gold, but more convenient.” The article goes on to suggest that “Bitcoin is too inefficient to be of much use for making payments.” 

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