Bitcoin’s price has climbed past $55,000 and is continuing to rise, even threatening to break a new record high.
According to Coindesk, the world’s largest cryptocurrency was valued at $56,852 (£41,600) on Monday morning, up from around $47,000 (£34,400) a week ago.
It has been a fairly tumultuous year for Bitcoin and cryptocurrency in general. Bitcoin started the year valued at less than $30,000 (£22,000) before more than doubling to a record high of around $63,000 (£46,500) in April.
By July it has crashed back to its start-of-year price, but now appears to be recovering strongly and could reach a new record.
Why is Bitcoin’s price rising?
Last week the Swiss Financial Market Supervisory Authority (Finma), the country’s financial regulator, has announced its first cryptocurrency investment fund, which has helped push Bitcoin’s value up.
The surge was replicated by other major coins including Ethereum, Ripple and Dogecoin.
Finma said the investment fund would “facilitate serious innovation in a consistently technology-neutral way”.
Simon Peters, an analyst at trading platform eToro, said: “Considering Switzerland has one of the largest banking sectors in the world and accounts for an estimated 25 per cent of global cross border asset management, the chance for investors to gain additional exposure to cryptoassets could be exciting for the space.”
Then, on Wednesday, someone made a $1.6 billion (£1.2bn) Bitcoin purchase. This purchase immediately pushed the coin’s price up by 5 per cent. It is not known who made the purchase, but it is believed to have happened in Asia.
This boost comes just weeks after Chinese regulators announced a further crackdown on Bitcoin mining, and made it illegal to trade cryptocurrency, which caused a dip in the market.
Bitcoin’s price has also been affected by El Salvador earlier this year becoming the first country in the world to adopt it as legal tender.
What could happen next?
Cryptocurrencies are notoriously volatile, meaning it is very difficult to predict what might happen next. Bitcoin could continue rising to a new record high, or it could crash dramatically overnight.
This is why it is also a risky investment, and you should only ever put in what you can afford to lose.
The Financial Conduct Authority (FCA) warned in January: “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money.
“If consumers invest in these types of product, they should be prepared to lose all their money.”
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown previously explained the risks to i.
She said: “On top of being extremely volatile, most cryptocurrencies are unregulated, which not only adds another layer of uncertainty but also means that investors have little or no protection against fraud.”
A Bank of America report published this week claimed cryptocurrencies are now “too large to ignore”
Alkesh Shah, global crypto and digital asset strategist at the bank, said: “Bitcoin is important, but the digital asset ecosystem is so much more. Our research aims to explore the implications across industries including finance, technology, supply chains, social media and gaming.
“In the near future, you may use blockchain technology to unlock your phone, buy a stock, house or fraction of a Ferrari, receive a dividend borrow, loan or save money, or even pay for gas or pizza.”
However, Bloomberg is reporting that the Biden administration is considering clamping down on cryptocurrencies.
Regulators have reportedly expressed concerns about the lack of protection for investors and possible risks to financial stability with the market booming.
Any such crackdown could push Bitcoin’s value down again.