The world’s largest and most famous cryptocurrency, Bitcoin, has squeezed past a valuation of $40,000 dollars per coin, within weeks of vaulting $20,000 for the first time.
The digital currency, which is renowned for its extreme volatility, held the landmark price point for a matter of minutes last night, before retreating to circa $38,000.
The arrival at the current valuation is the product of a bull run (or period of growth) that began in late November, at which point the cryptocurrency was valued at just $16,500.
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Ever since Bitcoin entered the public consciousness, a debate has raged about whether its meteoric rises in price constitute a market bubble (when the value of an asset becomes wildly over-inflated) or is actually representative of the role that crypto could play in the financial ecosystem of the future.
Long-time holders of Bitcoin (also known as HODLers) have had to weather a series of rises and falls in value. Most famously, after reaching highs of $19,783.21 in December 2017, Bitcoin plummeted to below $8,000 within just two months.
Investors that came in at the peak saw 60% of the value of their investment wiped out, which some saw as the popping of the Bitcoin bubble.
The most ardent Bitcoin supporters, however, have long maintained that the currency would reach new heights well beyond its current valuation.
And now, confidence in the cryptocurrency is starting to be echoed by institutional investors too. In recent months, insurance giant MassMutual purchased $100 million-worth, while tech firm MicroStrategy converted most of its balance sheet (circa $500 million at the time of initial purchase) to Bitcoin.
In December, the CIO of asset management firm Guggenheim Investments told Bloomberg he believes Bitcoin “should be worth about $400,000” and financial services firm JPMorgan has also suggested the currency may settle at a valuation in the hundreds of thousands of dollars, in the long-term.
However, while Bitcoin may yet reach far loftier valuations, investors looking to catch this latest wave should exercise a measure of caution. As in 2017, a significant market correction may soon take place, which could spell disaster for any investors unable to absorb the losses.
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