Bitcoin hits new peak again with biggest monthly gain since 2019

New York

BITCOIN, the world's largest cryptocurrency, is on track to close out a banner year with another bang.

The digital asset surged above US$28,000 on Wednesday to a record high, adding to its 47 per cent rally so far in December, according to data compiled by Bloomberg. Bitcoin rose as much as 6.2 per cent to US$28,572.10 in Asia trading and is on track for its biggest monthly gain since May 2019.

Bitcoin has almost quadrupled in value this year amid the global coronavirus pandemic, while the wider Bloomberg Galaxy Crypto Index tracking the largest digital currencies is up about 270 per cent as rival coins such as Ether have also rallied.

The latest price surge continues to divide opinion between those who view cryptocurrencies as a hedge against dollar weakness and inflation risk, and others who question Bitcoin's validity as an asset class given its speculative nature and boom-and-bust cycles.

"While a growing institutional presence has been part of the narrative of the current bull run, we may see increased retail interest in Bitcoin as a form of digital gold," Paolo Ardoino, chief technology officer of crypto exchange Bitfinex said.

Regulatory concerns also remain a wider factor for crypto investors. The Securities and Exchange Commission (SEC) this month accused Ripple Labs Inc and its top executives of misleading investors in affiliated token XRP. While Ripple plans to challenge the accusation in the courts, the development underscores the prospect of stricter oversight of digital assets.

XRP continued its plunge after Coinbase became the latest US crypto exchange to remove the world's fourth-biggest coin in the wake of an SEC lawsuit against Ripple Labs Inc. XRP tumbled 37 per cent on Tuesday, bringing its drop to 60 per cent in the week since securities regulators accused Ripple of issuing more than US$1 billion in unregistered tokens.

Coinbase said on Tuesday that it will fully suspend trading XRP on Jan 19, but will continue providing custodial services for clients. Customers will find it increasingly difficult to trade XRP after the largest exchange joined Bitstamp in delisting the token.

Coinbase customers can move it to another exchange, but it is growing more likely that the regulatory challenge will lead other US-based venues to follow suit.

Last week, the Bitwise 10 Crypto Index Fund liquidated its position in XRP, which comprised 3.8 per cent of its holdings.

"This is obviously bad for XRP across multiple dimensions: fewer potential buyers, and lower overall liquidity. For XRP to work as Ripple intends, XRP needs to be very liquid, so this is particularly harmful," said Kyle Samani, co-founder of Multicoin Capital.

The SEC said in last week's suit that Ripple raised more than US$1.4 billion through the sale of XRP without first registering it as a security with the agency, creating "an information vacuum" that mislead investors.

San Francisco-based Ripple has denied the allegations.

"The SEC has introduced more uncertainty into the market, actively harming the community they're supposed to protect," Ripple said in a statement on its website.

"It's no surprise that some market participants are reacting conservatively as a result. We'll be filing our response in a few weeks to address these unproven allegations." BLOOMBERG