Bitcoin, Ether hit new highs amid ongoing rally

New York

BITCOIN and Ether hit all-time records on Tuesday (Nov 9) in an ongoing cryptocurrency rally that some analysts attributed partly to the search for investments to hedge risks from inflation.

Bitcoin, the world's largest digital token, jumped as much as 3.6 per cent to US$68,513, while Ether posted a more modest advance to about US$4,840. The total value of digital tokens tracked by CoinGecko reached some US$3.1 trillion.

Trying to work out why virtual currencies are rallying is often a fraught task, but some theories pointed to the appetite for assets that can deliver returns even as the pandemic recovery stokes inflation.

Bitcoin is up more than 130 per cent this year and Ether some 550 per cent, though for critics the volatility inherent in digital tokens damages their claims to being a store of value.

Inflation hedges are "in demand with crypto leading", Chris Weston, head of research at Pepperstone Financial, wrote in a note, adding that "crypto is where the fast money is at".

Record-low real yields may also be stoking an appetite for riskier investments, potentially pushing some markets to perilous levels.

The Federal Reserve in a report warned asset prices are vulnerable if sentiment sours. It also flagged dangers from stablecoins, a type of token supposed to have a steady value.

Bitcoin last scaled a record in October following the launch of the first Bitcoin-linked exchange-traded fund for US investors. The landmark step fed the narrative that virtual coins are winning greater mainstream acceptance, including from institutional investors.

Still, the ride has been volatile. The token plunged below US$30,000 in June amid criticism of its energy consumption and China's cryptocurrency crackdown. It then recovered in part as the crypto sector adjusted to China's broadsides.

"This breakout in Bitcoin might signal the start of a final push-up for the fourth quarter before the crypto market shows more pronounced consolidation into next year," Fundstrat said in a technical-strategy report on Monday (Nov 8). "Strength in Bitcoin, Ethereum and many other altcoins looks likely in the weeks to come." BLOOMBERG