After gaining almost 10% over the past week and surging above $50,000 for the first time. Bitcoin has now hit a market cap of $1 trillion.
Richard Byworth, chief executive of crypto exchange group Diginex, said this would come if the leading cryptocurrency’s price reached around $54,000.
Despite hitting the $1 trillion market cap, many investors remain skeptical of the leading cryptocurrency. For instance, NYU economist Nouriel Roubini on Wednesday told Bloomberg that he thinks Bitcoin “is a bubble.”
“Fundamentally, Bitcoin is not a currency. It’s not a unit of account, it’s not a scalable means of payment, and it’s not a stable store of value,” he said.
Bitcoin Mainstream Adoption
Mainstream adoption increases Bitcoin’s correlation with cyclical assets. Which rise and fall with economic changes and in turn reducing benefits of diversifying into crypto.
“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities. With questionable diversification benefits at prices so far above production costs. While correlations with cyclical assets are rising as crypto ownership is mainstreamed,” analysts at JP Morgan said.
Other investors believe Bitcoin’s volatility presents a hurdle for its ambitions to become a widespread means of payment.
Tesla CEO Elon Musk said owning the digital coin was only a little better than holding cash. He also defended the company’s recent purchase of $1.5 billion worth of Bitcoin, which sparked the current bull run.
“There are a number of reasons why Bitcoin is soaring, but what stands out most is the trend that Microstrategy started and Tesla popularized: moving institutional balance sheets into Bitcoin to hedge against inflation,” Nicholas Pelecanos, head of trading at blockchain company NEM, said.
“This is just the start of a trend which could see billions of dollars flow into the crypto space over the course of 2021.”
Bitcoin advocates argue the cryptocurrency is “digital gold” that can hedge against the risk of inflation. However, it would need to surge to $146,000 for its market capitalization to equal total private-sector investment in gold.