Bitcoin hit $50,000 for the first time since May after dropping to $29,608 last month.
The $50,000 level was reached on Monday. As of Tuesday afternoon, the price of a bitcoin was resting at about $48,100. The flagship cryptocurrency is not the only one that has seen gains. Ethereum was up more than $3,300 after plunging to less than $1,800 in July, and Ripple has more than doubled in value since late last month.
While the summer rebound in prices is notable, it is still not quite the surge that was seen earlier this year when Bitcoin charged upward from $30,000 at the beginning of the year to being worth more than $63,000, the highest price in its history.
After peaking in April, the following months saw a downward slide in the prices of all the major cryptocurrencies. Much of those losses were tied to regulatory concerns out of China, where a lot of the world’s bitcoin and other cryptocurrencies are mined. Discussions of increased U.S. oversight also contributed to investor jitters.
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To mine for bitcoin, high-powered computers are used to create rigs that verify virtual coin transactions, and many of those rigs are located in China. Prices tumbled in May after Chinese Vice Premier Liu He called for the “crackdown on bitcoin mining and trading behavior and resolutely prevent the transmission of individual risks to the social field.” China’s central bank also said it asked banks and payment institutions to crack down harder on the trading of digital assets.
Recent gains are coming close to erasing the losses, which Peter St. Onge, a research fellow for economic policy at the Heritage Foundation, attributes to the current state of the U.S. economy, which has seen high inflation and uncertainty related to the delta variant of COVID-19.
“Bitcoin, in many ways, has picked up the investing function that gold used to have,” he told the Washington Examiner. “Gold is traditionally the alternative. When the stuff hits the fan, you move your money over to gold because it’s protected from inflation.”
St. Onge tied the price of Bitcoin to inflation and said that since June of last year, when inflation began to increase, the price of gold sat at $1,800, and the price of Bitcoin was about $10,000. He pointed out that despite the higher-than-anticipated inflation of the past several months, the price of gold has remained in the $1,800 range, while Bitcoin has lurched to $50,000.
The economist asserted that Bitcoin is largely serving the role that gold used to serve, a notion that he said was particularly true for younger investors. St. Onge said that people might be flocking to Bitcoin as a safe-haven asset more now because they have a better understanding of how it functions as it grows in popularity.
The upward pressure on Bitcoin this week was also being amplified by news that PayPal will let its customers in the United Kingdom trade in cryptocurrencies, which it has allowed those in the U.S. to do since late last year.
Meltem Demirors, chief strategy officer at CoinShares, told Yahoo Finance on Monday that the PayPal decision is “a sign that every company will eventually be a crypto company — they just don’t know it yet” and that the trend is “just getting started.”
“Crypto’s not a fad. There are elements of this, certainly, that feel a little speculative and bubbly… but if we zoom out and look at the secular 10-, 20-year trend… we view crypto as a fundamental enabling component of this new digital world,” Demirors added.
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St. Onge is also bullish on cryptocurrency. He said that early in the days of Bitcoin, investors had more regulatory fears than they have now, including worries that it might be banned. Although, he said the type of regulations being discussed now are “much less threatening” than in the past.
He also is confident that Bitcoin will become more commonplace going into the future and pointed out that Salvadoran President Nayib Bukele announced in June that the country would become the first to adopt bitcoin as legal tender.
