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Bitcoin steams to new record and nears $1 trillion market cap

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Bitcoin steams to new record and nears $1 trillion market cap 3

By Tom Wilson and Stanley White

LONDON/TOKYO (Reuters) – Bitcoin hit yet another record high on Friday, and moved within sight of a market capitalisation of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.

The world’s most popular cryptocurrency jumped 2.6% to an all-time high of $52,932, setting it on course for a weekly jump of over 8%. It has surged around 60% so far this month.

Bitcoin’s gains have been fuelled by signs it is winning acceptance among mainstream investors and companies, from Tesla and Mastercard to BNY Mellon.

Its latest gains took its market capitalisation – all the bitcoin in circulation – to about $982 billion, according to cryptocurrency data website CoinMarketCap, with all digital coins combined worth around $1.6 trillion.

Still, many analysts and investors remain sceptical of the patchily-regulated and highly volatile digital asset, which is still little used for commerce.

Analysts at JP Morgan said bitcoin’s current prices were well above estimates of fair value. Mainstream adoption increases bitcoin’s correlation with cyclical assets, which rise and fall with economic changes, in turn reducing benefits of diversifying into crypto, the investment bank said in a memo.

“Crypto assets continue to rank as the poorest hedge for major drawdowns in equities, with questionable diversification benefits at prices so far above production costs, while correlations with cyclical assets are rising as crypto ownership is mainstreamed,” JP Morgan said.

Bitcoin is an “economic side show,” it added, calling innovation in financial technology and the growth of digital platforms into credit and payments “the real financial transformational story of the COVID-19 era”.

Other investors this week said bitcoin’s volatility presents a hurdle for its ambitions to become a widespread means of payment.

On Thursday, Tesla boss Elon Musk – whose tweets have fuelled bitcoin’s rally – said owning the digital coin was only a little better than holding cash. He also defended Tesla’s recent purchase of $1.5 billion of bitcoin, which ignited mainstream interest in the digital currency.

Graphic: Cryptocurrencies surge multi-fold from March lows –

Bitcoin steams to new record and nears $1 trillion market cap 4

Bitcoin proponents argue the cryptocurrency is “digital gold” that can hedge against the risk of inflation sparked by massive central bank and government stimulus packages designed to counter COVID-19.

Yet bitcoin would need to rise to $146,000 in the long-term for its market capitalisation to equal total private-sector investment in gold via exchange-traded funds or bars and coins, according to JP Morgan.

Rival cryptocurrency ether traded down 0.5%, still near a record of $1,951 reached earlier on Friday. It has been lifted by growing institutional interest, and after its futures were launched on the Chicago Mercantile Exchange.

(Reporting by Tom Wilson in London and Stanley White in Tokyo; Editing by Sam Holmes and Pravin Char)

Finance

Elon Musk says bitcoin is slightly better than holding cash

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Elon Musk says bitcoin is slightly better than holding cash 5

(Reuters) – Tesla Inc CEO Elon Musk on Thursday said that owning bitcoin was only a little better than holding conventional cash, but that the slight difference made it a better asset to hold.

“However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere,” Musk said in a tweet. “Bitcoin is almost as bs as fiat money. The key word is ‘almost’.”

He also defended Tesla’s action to invest in bitcoin, saying that the difference with cash made it “adventurous enough” for the S&P 500 company to hold the cryptocurrency.

Tesla’s $1.5 billion bitcoin purchase set the cryptocurrency soaring toward this week’s record peak above $50,000 while Musk’s recent promotion of dogecoin on Twitter also lifted the price of that cryptocurrency.

Bitcoin was steady just below a record peak of $51,284 on Friday.

(Reporting by Aishwarya Nair and Shubham Kalia in Bengaluru; Editing by Sam Holmes)

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COVID response drives $24 trillion surge in global debt: IIF

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COVID response drives $24 trillion surge in global debt: IIF 6

By Marc Jones

LONDON (Reuters) – The COVID pandemic has added $24 trillion to the global debt mountain over the last year a new study has shown, leaving it at a record $281 trillion and the worldwide debt-to-GDP ratio at over 355%.

The Institute of International Finance’s global debt monitor estimated government support programmes had accounted for half of the rise, while global firms, banks and households added $5.4 trillion, 3.9 trillion and $2.6 trillion respectively.

It has meant that debt as a ratio of world economic output known as gross domestic product surged by 35 percentage points to over 355% of GDP.

That upswing is well beyond the rise seen during the global financial crisis, when 2008 and 2009 saw 10 percentage points and 15 percentage points respective debt-to-GDP jumps.

There is also little sign of a near-term stablisation.

Borrowing levels are expected to run well above pre-COVID levels in many countries and sectors again this year, supported by still low interest rates, although a reopening of economies should help on the GDP side of the equation.

“We expect global government debt to increase by another $10 trillion this year and surpass $92 trillion,” the IIF report said, adding that winding down support could also prove even more challenging than it was after the financial crisis.

“Political and social pressure could limit governments’ efforts to reduce deficits and debt, jeopardizing their ability to cope with future crises.”

“This could also constrain policy responses to mitigate the adverse impacts of climate change and natural capital loss,” it added.

EUROPE DEBT

Debt rises were particularly sharp in Europe, with non-financial sector debt-to-GDP ratios in France, Spain, and Greece increasing some 50 percentage points.

The rapid build-up was mostly driven by governments, particularly in Greece, Spain, Britain and Canada. Switzerland was the only mature market economy in the IIF’s 61-country analysis to record a decline in its debt ratio.

In emerging markets, China saw the biggest rise in debt ratios excluding banks, followed by Turkey, Korea, and the United Arab Emirates. South Africa and India recorded the largest increases just in terms of government debt ratios.

“Premature withdrawal of supportive government measures could mean a surge in bankruptcies and a new wave of non-performing loans,” the IIF said.

However, sustained reliance on government support could pose “systemic risks” as well by encouraging so-called ‘zombie’ firms – the weakest and most indebted corporates – to take on even more debt.

(Reporting by Marc Jones; Editing by Toby Chopra)

 

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Bitcoin’s record price unsustainable without lower volatility – JPMorgan

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Bitcoin's record price unsustainable without lower volatility - JPMorgan 7

LONDON (Reuters) – Bitcoin’s charge to a record north of $50,000 isn’t sustainable unless the cryptocurrency’s price swings cool down quickly, JPMorgan analysts said in a note.

The world’s biggest digital currency hit a record of $51,300 on Wednesday after smashing the $50,000 mark for the first time a day earlier, fuelled by signs it is winning acceptance among mainstream investors and companies.

Bitcoin’s three-month realised volatility, or actual price moves, is 87% versus 16% for gold – an asset proponents say it could threaten, the U.S. investment bank said in a note published on Tuesday.

The value of all bitcoin in circulation has swollen to $900 billion from $200 billion in September, the analysts said. The $700 billion jump has come the back of a total flow of just $11 billion from institutional investors into major trusts and futures markets.

Bitcoin’s limited supply – based on “miners” producing a set number of new coins – has led to a holders charging a premium on bitcoin coming to market, JPMorgan said. Retail flows may have also magnified institutional flows, it added.

(Reporting by Tom Wilson; editing by Thyagaraju Adinarayan)

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