Bitcoin is attempting to stage its next comeback as it came close to $US50,000 ($A68,000) for the first time since May as the broader cryptocurrency market also looked to claw back massive losses.
The most popular cryptocurrency, bitcoin is trading at $A44,500, and comes after the top ten cryptos, including ethereum and dogecoin, added $US300 billion ($A409 billion) to the market over the past week.
Tony Sycamore, APAC market analyst at City Index, said the bitcoin rally comes after last week’s ethereum upgrade and renewed optimism towards a bitcoin ETF, which would allow investors to buy into the digital coin without going through the complicated process of trading.
“This is overshadowing concerns the US could be about to pass legislation including cryptocurrency as part of tax reporting legislation in the Infrastructure and Jobs Act,” he noted.
“If bitcoin can see a sustained break above the 200 day moving average at $45,000 it would confirm a break out of the top of three month range and allow for further gains towards $52,000.”
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Crypto experts and investors are fearful the US regulations could make mining of cryptocurrency impossible and have described is a “backdoor ban”, while Coinbase chief executive Brian Armstrong branded the bill as “disastrous”.
Billionaire Elon Musk has also weighed into the debate arguing there is “no crisis” to warrant “hasty legislation”.
Meanwhile, ethereum experienced a strong rally last week with gains as much as 30 per cent as it underwent a major software upgrade on Thursday.
The digital coin was upgraded to stabilise transaction fees and significantly decrease the number of ether tokens available – which will in turn jack up the price of ethereum as there will be less supply and more demand.
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Crypto volatility
Jeremy Ng, Asia-Pacific Managing Director of Gemini, said recent research has shown that some crypto enthusiasts in Australia are looking to use the digital coins like bitcoin to protect themselves against inflation.
He said while some investors do get nervous about the volatility of bitcoin, it is to be expected for a relatively new asset class.
“Bitcoin is still maturing while climbing exponentially. Bitcoin, most notably, has had the highest average return across all asset classes in the last decade,” he said.
“At an average annualised return rate of over 200 per cent, bitcoin’s average return is over 10 times that of Nasdaq-100 index which was the second ranked asset class.”
However, regulators around the world are increasingly eyeing off cryptocurrency and the risks they could pose to people’s finances.
The UK financial regulator has previously warned that people should be prepared to lose all their money if they invest in cryptocurrency and recently banned one of the world’s largest exchanges Binance.