Proponents of digital currencies are exuberant about the potential for 2021 after a monster year that saw highflying Bitcoin prices grab control of the spotlight.

That's nothing new but the much wider feeling across Wall Street that "this time it's different" is.

Bitcoin prices recovered from a multiyear slump in 2020. It breached its 2017 record near $20,000 in November, and it has goneparabolic ever since, sitting well above $40,000 as of this publication.

What might actually make this time different, however, isn't that Bitcoin prices hit new highs in 2020 and finished the year with a head of steam. It's that the cryptocurrency succeeded in its first trial by fire.

The resilience of that digital coin and others and the reasons behind it have many excited not just about the prospects for this young asset class in 2021, but also for the overall adoption of this burgeoning financial technology.

First, a quick refresher for the uninitiated:

Bitcoin is one of many digital currencies. Unlike traditional "fiat" currencies created and operated by a government and central bank, Bitcoin is "mined," or created by people who solve mathematical problems with computing power. Transactions are kept on the blockchain, an encrypted and decentralized ledger that protects the integrity of Bitcoin while also ensuring the privacy of the user.

And in contrast to fiat currencies, whichcan be printed on demand, Bitcoin is limited to a total of 21 million possible coins once it is fully mined.(Fortunately, it can be divided fractionally down to 1/100,000,000th of a Bitcoin, known as a "Satoshi.")It was designed to be a true store of value that couldn't be manipulated.

Indeed, Bitcoin was invented in 2008 and launched in 2009, justas world governments were printing money to respond to the global financial crisis. A slew of other digital assets followed.

"One of the things that fascinates me with how Bitcoin has come into existence is that it came in upside-down," says Greg King, CEO of Osprey Funds, which operates the Osprey Bitcoin Trust. "It came in through individual acceptance, a grassroots type of thing."

Bitcoin prices crashedafter sharp rallies in 2013 and 2017, but these declines weren't precipitated by any major event spanning multiple asset classes. The digital coin was merely cut by the other edge of speculation's blade; worries about hacking risks, for instance, hampered cryptocurrencies in 2018.

So the bear market of 2020, brief as it was, marked the first time Bitcoin and other digital currencies faced a truly global crisis that threatened numerous types of investments.

Cryptocurrencies were hardly immune from the bear turn. Investors first started selling off equities in February as they moved to cash, and even safety plays such as gold eventually took a dip in March. But Bitcoin eventually fell, too, crashing hard in mid-March.

Those lows were short-lived, however. Digital currencies bounced hardest off the bottom, and Bitcoin turned positive by April.

It then took flight through the end of 2020.

"What we needed to see was Bitcoin survive a global macro meltdown," says Tyrone Ross, CEO of Onramp Invest, a digital platform allowing financial advisors to provide clients with access to cryptocurrencies. "If you look at when it was invented until March, it had never experienced a recessionary environment."

"It correlated with the market and came down with everything else. There was a flight to dollars. (But) if you look at how it behaved since then, folks see that there's something here. The actual activity on the blockchain was impressive."

A push to liquidity, such as the one seen in March, is rare, and it usually occurs at the climax of a market selloff. The fact that it also happened in Bitcoin around the same time hints that more institutional interest was in play than in previous crashes.

And growing institutional interest is one of several trends that King expects to be a major driver in Bitcoin prices over the years to come.

Coinbase, a digital currency exchange that's expected to go public this year, said on Nov. 21 that its institutional asset base from $6 billion in April 2020 to $20 billion as of mid-November. And Canaccord Genuity recently pointed out a laundry list of recent institutional and other noteworthy cryptocurrency events. Here are just a few highlights from the last quarter of 2020:

That's just a sliver of the announcements from Q4, which also included moves from a number of nations advancing digital currency or blockchain initiatives, including the U.S., Canada, Japan, England, South Korea, China and Russia.

King adds that individual interest is being driven higher as platforms such as Square (SQ) and PayPal (PYPL) are making digital currencies such as Bitcoin more accessible to people. And in October, Coinbase launched a cryptocurrency debit card under the Visa (V) banner.

Then there's inflation.

Cryptocurrencies such as Bitcoin are drawing comparisons to gold, as they're a relatively fixed asset at a time when fiat money printing is growing out of control.

Billionaire Paul Tudor Jones, a relative newcomer to the space, told CNBC that the cryptocurrency market is "still in the first inning" and that he sees Bitcoin as a better inflation play than Treasury Inflation-Protected Securities (TIPS) and gold.

BCA Research strategists see a similar advantage, saying that "in addition to benefitting from ample global liquidity and the cyclical US dollar bear market, Bitcoin will be an attractive hedge against rising inflation in the second half of the decade."

Time will tell whether that's the case. Inflation fears after the financial crisis led to a spike in gold prices in 2011, but when higher rates of inflation failed to materialize, investors exited the gold trade quickly. Nevertheless, the metal, like its digital counterpart, did make new highs in 2020 around $2,070 per ounce; unlike Bitcoin prices, gold has pulled back considerably, now sitting around $1,850.

King says there's another interesting twist to the cryptocurrency narrative this time around.

"One thing I've found interesting versus 2016 and 2017 is nobody's asking about Bitcoin and nefarious activities," he says. "I haven't gotten a single question on that. Obviously, all types of currencies are used for illegal activities. That question seems to have disappeared. To me, that's an indicator of growing acceptance and understanding."

It's possible cryptocurrency is following the playbook laid out in 1914 by union leader Nicholas Klein: "First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you."

Bitcoin is attracting a growing number of analysts, and as a result, Bitcoin price targets are becoming more commonplace.

Some have been downright bombastic. Former Adaptive Capital partner Willy Woo calls $200,000 a "conservative" estimate for year-end 2021. In mid-November, Citigroup told its institutional clients that it sees the potential for Bitcoin prices to rise as high as $318,000 by the end of this year.

Others are more restrained. For instance, BTIG's Julian Emanuel says Bitcoin could reach $50,000 the same price target Bloomberg pointed to in its Crypto Outlook 2021.

Ross, without making a specific prediction, sees the cryptocurrency space further growing in value to the global financial system:

"I think in 2021 we'll see a lot of news that will move the price higher," he says. "We'll get closer to an ETF, announcements from broker-dealers that they're getting involved. Some more FOMO (fear of missing out) from retail investors, and what you'll also see is that at some point you'll see a massive RIA announce that they have a meaningful amount of their business in BTC."

"One of the things we do believe is that there's a secular trend into Bitcoin," adds King, who's also reticent to throw out a price target. "We're in an S-curve type of growth with an emerging technology. If you look at the previous patterns of prices versus adoption, it tends to consolidate and then have a multiple move higher. This is starting to look pretty decisively higher."

This combination of increased investment interest in Bitcoin as an investment, as well as increased adaptation of Bitcoin, cryptocurrency and blockchain technologies by companies, points to a perfect storm for prices.

But Ross adds a word of caution.

"You always have risk," he says. "Systemic risk, market risk There are some global macro events that can affect markets, and as Bitcoin becomes more financialized, it won't become that noncorrelated asset anymore."

One of the biggest risks to any bullish calls, sky-high or not, is the potential for regulatory agencies to suddenly erect a brick wall.

While fewer people might be asking about using Bitcoin to buy illicit substances anymore, regulatorsare again taking a close look at digital currencies, this time with a focus on how these coinsact as securities.

The most noteworthy of late: In late December, the Securities and Exchange Commission SEC filed a lawsuit against the "altcoin" Ripple. (Altcoins are any digital coin that's an alternative to Bitcoin.)The issue at question is whether its digital currency is really a digital currency, or if it's an unregistered securities offering.The news was enough to cut Ripple pricesby more than half in just a few days, and several cryptocurrency exchanges stopped trading in the altcoin until the issue is resolved.

Even then, some Bitcoin bulls see a silver lining.Ripple has a different mechanism relative to Bitcoin's decentralized model, so somebelieve a crackdown on altcoins points to Bitcoin as the first (and maybe only) stop for people interested in cryptocurrencies.

While Bitcoin prices might be sitting above $40,000 right now, you can still enter it (and most other cryptocurrencies) for literally just a few bucks by purchasingfractions of coins. But no investor should spend a cent without brushing up on what is still a very nascent technology and asset class.

"The best investment that any investment that any individual can make is learning as much as they can," Ross says. "That truly is the best way."

To that end, sites such as Coinbase and Binance Academy offer rudimentary basics to get people up to speed.

If you feel like you're ready to begin investing directly in the cryptocurrencies themselves, you can do so on a number of sites, including Coinbase and Robinhood, and even PayPal and Square's Cash App.

Just consider startingsmall.

Most analyst outfits at this point have at least acknowledged the upside possibilities for Bitcoin and other digital currencies. However, theydon't all view cryptocurrenciesas investment-worthy for most retail investors just given the still-speculative nature of the space and uncertain regulatory outlook.

Not to mention, for all their highs, digital currencies have shaken a lot of people out at their lows.

"If you feel left out of the gains, don't," the Wells Fargo Investment Institute wrote in December. "Bitcoin has indeed outperformed gold and the S&P 500 Index over the last three years, but look at the volatile journey Bitcoin investors had to endure to get there. Up until only two months ago, three-year total returns were pretty much the same among the three assets, but volatility differed.

"Cryptocurrency investing today is a bit like living in the early days of the 1850s gold rush, which involved more speculating than investing," adds the WFII, which still admits "fads don't typically last 12 years."

Those who only invest through 401(k)s, IRAs and other accounts through traditional brokerages can't directly invest in digital currencies through those vehicles yet. But you still have a few options, such as investing incompanies that have tied their futures to cryptocurrencies and/or blockchain technology.

"For most traditional investors, look at companies that are on the fringe of this technology, like Square," Ross says.

The SEC has not yet approved anexchange-traded fund (ETF) that tracks Bitcoin prices by actually holding thecryptocurrency in the same way that, say, the SPDR Gold Shares (GLD) holds gold. (However,many hope 2021 is the year we finally see a Bitcoin ETF.)

However, investors do have access to a few ETF-esque funds. For instance, the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), which trade "over the counter," track the price of their respective cryptocurrencies. But theyare different than ETFs in a few noteworthy ways, whichwe outline here, that investors should know about before purchasing.

Link:
The 2021 Outlook for Bitcoin Prices, Adoption and Risks - Kiplinger's Personal Finance

If the running joke of the late 2017 bitcoin price surge was the image of families discussing crypto around the Thanksgiving dinner table (Grandma, you should buy litecoin!), the theme of the late 2020 run has been Wall Street hedge fund runners and billionaire investors going on television to say some form of, I was wrong.

In the past year, Paul Tudor Jones said he has put 2% of his portfolio in bitcoin and predicted that as new cryptocurrencies proliferate, bitcoin will become even more distinct as the precious crypto. Stan Druckenmiller said he has bought bitcoin, and predicts his bitcoin bet will probably work better than his gold bet because its thinner, more illiquid and has a lot more beta to it. Ray Dalio, one month after saying on Twitter that he sees three major problems with bitcoin, including the potential for governments to outlaw them, reversed his tune, now saying bitcoin could serve as a diversifier to gold and that investors ought to have some of these types of assets. Jamie Dimon, three years after calling bitcoin a fraud... worse than tulip bulbs, now says bitcoin is merely not my cup of tea and acknowledged that very smart people are investing in bitcoin. His bank in 2020 partnered with multiple major U.S. bitcoin exchanges.

In 2020, Wall Street warmed up to bitcoin. So did big consumer-facing payments names like PayPal and Square, two brands with more mass recognition and legitimacy than, say, early crypto adopter Overstock.com. Visa and Fidelity are some of the other major financial names that have partnered with crypto startups or dipped into crypto in other forms, if not quite as loudly as PayPal (PYPL) and Square (SQ).

The COVID-19 pandemic provided the spark. With central banks pulling levers and printing stimulus checks, bitcoins long-hyped appeal as digital gold and a hedge against inflation became more convincing than ever before. Theres so many uncertainties in this pandemic, but one thing that seems almost assured is when you print trillions of dollars more paper money, its going to drive up bitcoin and other cyptocurrencies, Dan Morehead, CEO of crypto firm Pantera Capital, said in August.

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Bitcoin took more than 10 years to hit $20,000 on most exchanges (since cryptocurrency is traded on multiple exchanges, there is rarely one consensus price). Then it leapt from $20,000 to $30,000 in a little over two weeks. It topped $35,000 four days later.

Since its inception, the bitcoin market has always been fueled by narratives.

After events like the FBI shutting down Silk Road in 2013 (an online black market site that used bitcoin as its payment) and the theft of 850,000 bitcoins from Mt. Gox in 2014 (an early bitcoin exchange that filed bankruptcy shortly thereafter), bitcoin was for years dogged by a stigma that it is unsafe, subject to theft, and favored by hackers and scammers.

Crypto diehards adopted the retort that the U.S. dollar is used for crime too, but it didnt do much to combat bitcoins association with cybercrime. Over the years, Nouriel Roubini called bitcoin the mother of all scams; Jamie Dimon called it fraud; Saudi Arabias Prince Alwaleed called it Enron in the making; and Charlie Munger of Berkshire Hathaway called it disgusting... stupid... turds.

The image of bitcoin as vaguely fraudulent lingered, but bitcoin and ether (the token of the Ethereum blockchain, launched in 2015, and the No. 2 cryptocurrency by market cap) both eventually enjoyed a boost in legitimacy compared to the junky, meme-based coins of the ICO boom.

Amid bitcoins dramatic surge in 2017, fledgling tech startups flocked to a new funding method: the initial coin offering, in which a company creates and sells its own digital token to raise instant capital without begging at the feet of venture capital firms. Token sales began in 2014, but intensified with the rise of Ethereum and peaked in Q4 2017, with investors buying $3.4 billion worth of newly created coins, more than three-quarters of them from companies that had no product and had done nothing apart from sell the token.

Then 2018 brought the ICO bust, as the SEC widened its crackdown on companies that conducted token sales and repeatedly made clear its view that the vast majority were unregistered securities offerings. (At a Yahoo Finance summit in 2018, an SEC official declared that the agency does not view bitcoin and ether as securities; XRP, the token created by Ripple Labs, is currently facing a $1.3 billion SEC suit over this same distinction.)

With the ICO frenzy largely in the rearview, and with the largest U.S. crypto exchange site Coinbase planning to go public this year, the bitcoin market may be entering a new phase of maturity. The hope among crypto investors: This time is different from 2017.

Wall Street investment firms pumped a total $5.75 billion into crypto funds in 2020, up 660% from 2019, according to a crypto inflows report from CoinShares. That flood has boosted Grayscale Investments, the largest crypto asset fund, to $20 billion in assets.

The surge has brought the overall crypto market cap above $1 trillion for the first time. This week, trading volume across the major cryptocurrency exchanges hit a new daily record of $68.3 billion, according to CryptoCompare, suggesting an extremely active (if also volatile) trading market. The blockchain research firm Glassnode estimates so much bitcoin is being held by long-term institutional investors that just 22% of existing bitcoin is in circulation for trading, which could mean increased volatility.

But with maturity comes regulation.

Last month, FinCEN (the Financial Crimes Enforcement Network, an arm of the U.S. Treasury) proposed new, tighter customer information rules for crypto wallets. Companies that hold customer crypto funds were quick to voice their displeasure. Square released a statement saying that the new rules would not only hamstring law enforcement capabilities, but also limit American innovation by hindering our ability to create a competitive service that allows customers to seamlessly transfer and transact in crypto. Coinbase and the powerful VC firm Andreessen Horowitz plan to fight the rules in court. Separately, this week the OCC (Office of the Comptroller of the Currency, a different bureau within Treasury) declared that federally chartered banks are free to embrace stablecoins, cryptocurrencies that are pegged to the price of the fiat currency like the U.S. dollar to limit volatility. (Facebooks intended Libra token, now rebranded Diem, is a stablecoin.)

Wall Street firms may welcome regulation as a sign of seriousness, but regulation is at odds with the original appeal of bitcoin to its earliest adopters (many of whom were libertarian): that its outside government reach and control, unregulated, no middleman. This push and pull is yet another narrative that will continue and intensify in 2021 and beyond, as the bitcoin investment market matures.

Daniel Roberts is an editor-at-large at Yahoo Finance and has covered bitcoin since 2011. Follow him on Twitter at @readDanwrite.

Read more:

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Link:
How bitcoin narratives have evolved to fuel current price surge - Yahoo Finance

The options market is signaling an impending change in the market focus from bitcoin to relatively undervalued ether and other alternative cryptocurrencies.

The spread between the six-month implied volatility (IV) for ether and bitcoin a measure of the expected relative price volatility between the two has risen to a record high of 46%. That surpasses the previous peak of 45% seen on Feb. 21, 2020, according to data provider Skew. The three- and six-month spreads have risen to an 11-month high of 32% and 23%, respectively.

The widening of the IV spreads indicates that the market expects ether and other alternative coins to chart bigger percentage moves than bitcoin in the near term.

Traders are expecting increased volatility for ether relative to bitcoin, Skew CEO Emmanuel Goh told CoinDesk. This is consistent with decreasing correlation and a pick-up in interest across alternative cryptocurrencies.

Implied volatility is the markets expectation of how risky or volatile an asset would be over a specific period and is driven by net buying pressure for options and historical price volatility. Ether is the second-largest cryptocurrency by market value, and many other so called altcoins are based on Ethereums blockchain technology. As such, alternative cryptocurrencies tend to trade in line with ether.

The one-month spread has seen a five-fold increase since Dec. 30, alongside a weakening positive correlation between ether and bitcoin.

The three-month realized correlation has declined from 67% to 56% in the past five days to hit the lowest level since March 2018, according to data source Skew. The trend looks set to continue, as suggested by the widening of the IV spreads.

While rising volatility spread implies scope for relatively bigger percentage moves in altcoins, it does not tell us anything about the direction of the moves.

That said, alternative cryptocurrencies are now looking cheap compared to bitcoin and the market is extremely bullish. So alts could soon be charting bigger percentage gains than the crypto market leader bitcoin,as predictedby analysts earlier this week.

Despite having rallied from $700 to $1,200 this month, ether is still nearly 20% short of its record high of $1,432.88 reached in January 2018. Similarly, litecoin, stellar, chainlink and other prominent coins are yet to set new lifetime highs. At its current price of over $37,000, bitcoin is up over 60% from the previous lifetime high of $19,783 registered three years ago.

Some may argue that implied volatility reflects investors expectations of price turbulence and may not turn out to be reflected in the charts going forward. However, historical data shows implied volatility spreads are reliable indicators of upcoming shifts in the market. For example, the ether-bitcoin IV spreadnosedivedin the second half of September 2020, warning of a big move in bitcoin. The cryptocurrency outperformed most other cryptos by a significant margin in the final quarter of last year with a 168% rally.

More here:
Expected Rise in Ether-Bitcoin Volatility Points to Altcoin Season Ahead: Analyst - CoinDesk - CoinDesk

Shares of cryptocurrency miner Marathon Patent Group Inc.shot up around 20% on Wednesday, helping to make the company the most recent member of the $1 billion digital-mining group, as bitcoin hit a fresh record near $36,000.

According to FactSet data, the market value of Marathon Patent MARA, +18.02% was at $1.030 billion, after its shares gained a fifth in value contributing to a $165 million gain in market capitalization from yesterdays rise.

Marathon has gained more than 55% so far in January and Wednesdays rally puts it in league with rival mining company Riot Blockchain RIOT, +17.03%, which boasts a market value of $1.3 billion, having entered the billion-dollar club last month.

Check out: Heres how bitcoin could soon be worth $146,000 according to JPMorgan

Digital mining refers to the use of high-powered computers to generate new units of the cryptocurrency, by solving complex problems that have become harder over the years by virtue of how bitcoins were originally encoded.

Bitcoin mining expends a tremendous amount of electricity and now requires specialized hardware.

And miners like Marathon and Riot Blockchain,play a key rolein maintaining bitcoins self-sustaining network, running the decentralized software that verifies transactions.

The gains in those companies have come as bitcoin staged a stratospheric rise in the past several months, closing out 2020 up about 300% and kicking off 2021 with a rise of over 20% so far.

At last check, a single bitcoin BTCUSD, -0.03% was valued at $34,758, up nearly 2% on the day, but off its intrasession peak at $35,879, FactSet data show.

Higher prices for bitcoins can justify the high cost of mining for new coins, however. Currently the daily profit from one bitcoin miner is $10.06,according to mining-calculator site BTC.com, supported by recent gains in prices.

Last year, Marathon Patent shares surged Marathon Patent over 1,000%, as it attempted togrow its mining enterprise.

To be sure, these companies are a risky investment, experts warn, particularly if the price of the virtual asset falls, but the surge in shares of these companies reflect the newfound fervor around bitcoin and its ilk.

Bitcoins gains are drawing investments away from gold GOLD, -3.23%, experts say, as a runup in the Dow Jones Industrial Average DJIA, +0.18% and the S&P 500 index SPX, +0.55% has market participants worried about lofty valuations in equities against the backdrop of interest rates at or around 0%.

Read the rest here:
Bitcoin's record rise near $36,000 mints another $1 billion 'mining' company - MarketWatch

"Bitcoin hits another all-time high".

You've probably seen headlines like this way too many times recently, even if you have no idea what bitcoin is.

Speculation, "FOMO" (fear of missing out) and inflation hedging are some of the reasons why this volatile digital currency has surged more than 400 per cent in the past year.

Bitcoin's supporters were excited when it hit $US20,000 on December 17, then celebrated again two weeks later when it jumped to a new high of $US30,000.

It took just six days for bitcoin to surge again (at even more rapid pace) to $US40,000.

Its value has since risen slightly to $US40,300 by 6.45am AEDT on Saturday.

When you count the value of every bitcoin and other cryptocurrency (ethereum, tether, litecoin, and 4,180 others), their total market value has now surpassed $US1 trillion.

Political developments in the United States appear to have fuelled the latest rally.

Bitcoin has surged more than 16 per cent since Wednesday afternoon (local time), when a mob of pro-Trump supporters stormed the US Capitol building, in a failed attempt to prevent Congress certifying the 2020 election result.

But the more important factor (from an economic perspective) was the Democrats' improbable victory in the Georgia run-off elections, which effectively hands them control of the US Senate (with a slim majority).

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This means the so-called "blue wave" has materialised, since Joe Biden and the Democrats have also won the White House and House of Representatives.

Investors are betting the US Government will soon inject more cash (up to $US800 billion) into its COVID-ridden economy which is easier to do when a single party controls all arms of Government.

While bitcoin has surged 400 per cent in the past 12 months, the US dollar has tumbled (-7.5pc) to its lowest value in three years.

It coincided with US Congress pumping a record $US2 trillion into pandemic relief, followed by another cash splash of $US892 billion in December.

The Federal Reserve was also forced to slash US interest rates to near zero in March, in a desperate attempt to stimulate an economic recovery.

Across the world, governments and central banks have also made similar moves slashing rates to zero (or negative territory) and printing trillions of dollars' worth of cash (also known as quantitative easing).

Supporters of bitcoin have long trumpeted the idea that cryptocurrencies are "digital gold" which serve as a "hedge against inflation".

Basically, it's a strategy where you buy an asset (which is expected to maintain or increase its value), while the value of money falls because the Government prints more of it, so the currency is no longer in short supply.

Back in December 2017, cryptocurrency enthusiasts rejoiced when bitcoin climbed above $US19,783 (its record high at the time).

Much of it was driven by "FOMO" as speculators piled in.

It took less than a month for its value to crash below $US11,000. Then its value plunged below $US3,300 in less than a year.

Analysts are sceptical of Bitcoin's meteoric rise. Here's why some are predicting a crash, and what that would mean.

However, cryptocurrencies made a comeback in 2020 as the pandemic ravaged global share markets (hitting oil and travel stocks particularly hard).

"It was our busiest year since 2017 the last big bull run we had," said Adrian Przelozny, head of cryptocurrency exchange, the Independent Reserve.

"What we've seen over the last year is larger, more sophisticated investors entered this space. Hedge funds, large companies and a lot of banks entering this area as well."

"So it's really a sign of the growing maturity of the industry, and it's becoming seen as a more accepted asset class one of those things you'd hold in a portfolio."

Its recent popularity was also partly due to the perception that cryptocurrencies are gaining more mainstream acceptance as major companies like PayPal now allow users to buy and sell cryptocurrencies on its ubiquitous payment platform.

Speculation and "FOMO" are still playing a role, especially with banking giants like JP Morgan predicting in a research note (earlier this week) that bitcoin could hit $US146,000 in the long term.

Interestingly, JP Morgan's chief executive Jamie Dimon has called bitcoin a "fraud" that will eventually "blow up", and that he would fire his traders "in a second" if he discovered they were trading bitcoin.

In the long term, Mr Przelozny believes that as bitcoin's value soars it will become tougher for major investors to manipulate its value.

"In 2011, during its infancy, the volatility was higher as its market capitalisation was lower, so it was much easier for a large player to move the price," he said.

"As the market cap increases, it takes a much bigger investor to move the price.

"We'll see volatility decrease in the next year or two as it becomes less of a risky investment. But it's still very volatile of course."

AMP Capital's chief economist Shane Oliver has long been a bitcoin sceptic, and he has no regrets about "missing out" on the recent surge.

"It just reinforces my view that this is a highly volatile, speculative investment," he said.

Dr Oliver said bitcoin's extreme volatility makes it an unreliable "store of value".

The boss of JPMorgan Chase said if his staff were caught trading bitcoin he would "fire them in a second" and it's a "fraud". So, is it?

"Through the time, that it's gone from virtually zero to $US19,500, back to $US3,500 and now to $US23,000."

"The value of the $50 note in my wallet has hardly changed in value, in terms of what it can buy but if I had the equivalent in bitcoin, it would have varied dramatically."

Dr Oliver argued that "the problem with bitcoin" is that it's very hard to value it objectively.

"When you look at the share market and property, you can look at the income they generate. But with bitcoin it's all bit of a mystery."

"We also don't know to what degree it's ultimately going to be used as a digital currency.

"If you're confident on the global economic outlook and you believe the US dollar is going to fall which I think it will there are better fundamental ways to play that, than via bitcoin.

"But that's not to say it can't double in value in the next 12 months."

However, "bitcoin mining" is an energy-intensive process, which is estimated to consume more power than it takes to keep the lights on in nations like New Zealand.

In 2018, more than 1,200 Australians complained to the consumer watchdog (the ACCC) about cryptocurrency scams.

Cryptocurrencies are frequently used on darkweb marketplaces like Silk Road and Valhalla to facilitate the sale and trafficking of illicit drugs, firearms, precursor chemicals and child exploitation materials.

Australia's Criminal Intelligence Commission (ACIC) also warned, in a report, that cryptocurrencies are getting increasingly used by "serious and organised crime groups".

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Bitcoin is surging to record highs on 'FOMO' and Joe Biden stimulus bets - ABC News