Bitcoin has continued its Santa Claus rally at the end of the year, surrendering to a new high of more than $ 28,500.
The cryptocurrency gained more than 5% to hit $ 28,572 on Wednesday. It is up 47% from the beginning of December and is on track for its biggest monthly gain since May 2019.
Bitcoin has almost quadrupled in value this year as interest from institutional investors has grown.
As the U.S. dollar declines, bitcoin has become a more attractive investment amid concerns that major government stimulus packages triggered by the coronavirus pandemic will fuel inflation. In the U.S., a bigger package could pass once Joe Biden has replaced Donald Trump as president.
On Wednesday the dollar fell to its lowest level since April 2018, when it was weighed against a basket of currencies. The U.S. currency is under pressure as investors move into more risky assets, promising a strong economic recovery next year when coronavirus vaccines are released. The vaccine developed by Oxford University and AstraZeneca was approved in the UK on Wednesday.
Bitcoin was also encouraged with the expectation that it will become a more conventional payment method. PayPal has launched a crypto trading service on its platform and it is reported that it has purchased nearly 70% of all new bitcoin in circulation. A number of hedge fund managers have revealed this year that they have invested in the cryptocurrency.
Bitcoin is even touched as an alternative to gold. Gold, the traditional safe haven investment, has declined since hitting a high of more than $ 2,000 an ounce in August, and is now flat at $ 1,879 an ounce. Some analysts expect gold and bitcoin to struggle for dominance next year.
Paolo Ardoino, chief technology officer of crypto exchange Bitfinex, said bitcoin could attract more interest from a wider audience, not just asset managers. “While a growing institutional presence is part of the current bull run statement, we may see increased selling interest in bitcoin as a form of digital gold,” he said.
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Other cryptocurrencies like Ether have also accumulated. However, there are still concerns about the speculative nature of cryptocurrencies, and there are regulatory issues. Last week the U.S. Securities and Exchange Commission accused Ripple Labs and its senior officials of misleading investors in XRP, the third-largest cryptocurrency, by selling $ 1bn of the tokens meaningful without registering with the organization.