Bitcoin Price: Cryptocurrency Surge Past $20,000, What The Rally Means For Investors?

Investor are advised to put only a limited amount in bitcoin after clearly understanding the risks and benefits and only if you can absorb its extreme volatility.

(Representative Image/ AFP)

Bitcoin Surge: Bitcoin on Wednesday broke the record to surge past over $20,000 for the first time on Wednesday on the back of a 170% rally this year.  After surging about 20% this week, the Bitcoin rose as much as 4.6% to touch $22,173 on Thursday, before paring some of the advance. The rally has come amid central banks printing money to help the global economy recover from the deepest recession since the Second World War. If you go by experts, it is believed that the digital coin is expected to witness more gains ahead bringing back the focus on the growing popularity in the 12-year-old digital coin once again as it is trying to establish itself as a widely accepted, stable mainstream asset. What is the performance of the cryptocurrency so far? In the 2017 bull run, the popular cryptocurrency saw price double to $19,511 in less than a year, forcing mainstream investors to stop and take notice of a digital coin that was often criticised. But the euphoria soon fizzled out; Bitcoin fell 70% the next year Investors are betting on the cryptocurrency mainly to hedge against inflation, but the crash left many retail investors alarmed and brought to the fore the coin's addiction for highs and lows. Bitcoin's performance in the past also remained extremely volatile. In 2011, the digital asset skyrocketed 11,000% to $35 within months only to lose 90% of those gains in the following months. Two years later in 2013, the coin ascended to above $250 before falling more than 80%. Later that year, Bitcoin breached $1,000 to reach record levels. Just over a year later in 2015, it again found itself falling at around $150. What does the current rally means for investors? Despite expectations of the yet another rally, investors witnessed the bitcoin plunging close to $3,000. The sudden crash was caused due to profit buying by investors ahead of the expectations of a record high and rumors that the US was considering new rules to regulate cryptocurrencies. Earlier in March, Bitcoin had fallen 40% in a single day just before the coronavirus pandemic. The digital asset has witnessed extremely volatility as it moved 2.7% on an average daily this year, according to Bloomberg. By comparison, the price of gold saw swings of 0.9%. Also, the digital coin remains concentrated in very few hands, adding to its volatility. If at all an investor decides to put money in bitcoin, it is advisable to invest a limited amount after clearly understanding the risks and benefits.  It is better to diversify holdings across different currencies to remain protected against the possibility of one or more currencies suddenly crashing. It is seen that gold's recent poor performance will remain weak with the development on the vaccine front and inflation also not expected to go through the roof anytime soon. It implies that Bitcoin's rally is more to do with speculation than its role as a hedge against price rise.