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Bitcoin price flirts with all-time high as inflation threatens

·3-min read
Bitcoin price
The recent surge in the crypto asset partly seems to have been caused by investors piling in, seeing it as a hedge against inflation. Photo: Florence Lo/Illustration/Reuters

Bitcoin (BTC-USD) rallied on Monday in London, flirting with record highs, as expectations for inflation readings in the US pointed higher.

At 11.30am it was 6.6% up, trading at $65,884 (£48,848), having topped $66,000 earlier in the session. It looked set to breach the record high of $66,975 set in October.

The recent surge in the crypto asset partly seems to have been caused by investors piling in, seeing it as a hedge against inflation.

Some appear to have been enticed by the argument that the huge monetary stimulus programmes unleashed by central bank is fuelling inflation which will see the value of money decrease over time, whereas bitcoin has a fixed limit on the number of coins which can be created.

"It’s a highly risky strategy given just how volatile the crypto currency is, amid other pressures on its valuation like clampdowns by authorities and even comments on social media," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"As bitcoin increases in value, mining of the crypto asset also ramps up, which is still hugely energy intensive, despite some moves to power more proof of work using renewables, and it’s likely to attract more adverse headlines especially given the focus on soaring emissions during COP26."

Streeter says that the recent an announcement that the US Federal Reserve will begin to taper its bond buying programme could also trigger a mini selloff.

A fresh tranche of CPI data are scheduled to be released on Wednesday 10 November.

Elsewhere in the market other tokens also gained. Ethereum (ETH-USD) broke its previous record high earlier on Monday, as it passed $4,700. It was up 3%, trading at $4,723 at 11.40am in London.

Bitcoin five-day chart. Source: Yahoo Finance
Bitcoin five-day chart. Source: Yahoo Finance

According to the global crypto market cap was up 3.9% on Monday.

Read more: Philip Hammond: Big finance's move into crypto is unstoppable

"Australia’s securities watchdog has followed other global regulators, by giving the green light to the highly anticipated spot exchange-traded funds (ETFs) in a move that has provided a framework for other countries to follow suit," said Nigel Green, the CEO and founder of DeVere Group.

“This move — especially when other regulators do the same, which they will — will mean that not only more retail investors will pile in but, crucially, more institutional investors such as family offices, hedge funds and real money asset managers will further increase their exposure into digital assets."

As bitcoin moves towards fresh all-time highs, other cryptos can also be expected to move to the upside, said Green. “Bitcoin’s gravitational pull on other digital assets will show itself again this week, pulling up other major cryptocurrencies as it maintains its own strength.

“We can expect those cryptos involved with fintech development, such as Ether, Solana and Cardano, to do particularly well."

Watch: Big finance's crypto adoption is unstoppable, says Hammond