Bitcoin has smashed its way to new heights as it became more valuable than Mastercard or Visa.
The digital currency hit an all time high with a price of $US28,000 ($A36,800) as investors scramble to avoid inflation — where the purchasing power of money is decreased — which has been brought on by the impact of COVID-19 on the world’s finances.
Currently, interest rates in the US are close to zero resulting in a severely weakened US dollar.
With a set amount of bitcoin in the world and further restrictions put in place on the cryptocurrency in May, supply and demand is driving prices this year as it has moved from something fringe to mainstream, according to Finder co-founder Fred Schebesta.
He said there has been a big increase in demand from a retail perspective including PayPal allowing people to buy and hold cryptocurrency in their accounts, but hedge funds and corporate companies are also seeing it as a way to shield against currency risk.
“Its always been very popular in terms of retail, but right now those institutional hedge funds and corporate companies are protecting themselves by using bitcoin,” he told news.com.au.
“Given there is huge amounts of money printing going on, particularly in America — they have just ratified a bill to print another $US9 billion dollars — and that is going to cause inflation, so people are looking at ways to offset that. The best way to offset that is something scarce and rare and there are only 21 billion bitcoin and there will only ever be 21 billion worth of bitcoin.”
American investment management firm, Blackrock, predicted cryptocurrency could replace gold.
Meanwhile, Nasdaq-listed business intelligence provider MicroStrategy has purchased over $US1 billion ($A1.3 billion) in Bitcoin just this year, with Tesla’s Elon Mask exploring converting a large amount of its US dollars into the cryptocurrency.
While some put the surge in demand down to FOMO, Mr Schebesta said people are realising that bitcoin is a rare commodity that can be used as treasury tool to hedge against currency risk around the world.
“It’s not run by government, it’s run by the people,” he said. “It’s really coming of age and it’s triggered by coronavirus and a lot of this money printing.”
Global investment firm Skybridge Capital’s founder Anthony Scaramucci said bitcoin had room to grow but warned it was a risky holding and could suddenly tumble by 20 to 50 per cent in value.
“Bitcoin’s best days are ahead of it, but it’s going to be volatile and I think people need to be prepared for it,” Mr Scaramucci told CNN Business.
Bitcoin has a market value worth $US500 billion ($657 billion).