The total market value of all cryptocurrencies rose above $1 trillion for the first time last Thursday as Bitcoin surged to a record high.
Bitcoin has jumped more than 900 percent from a recent low of $3,850 in March, breaking $40,000 for the first time on Thursday as governments increase spending to blunt the economic impact of the pandemic.
The massive spending on stimulus has raised fears about rising inflation and U.S. dollar debasement, and investors are flocking to Bitcoin as a safe haven.
The cryptocurrency is also gaining traction with more mainstream investors who are increasingly convinced that Bitcoin will be a long-lasting asset, and not a speculative bubble as some analysts and investors fear.
Bitcoin has jumped more than 900 percent from a recent low of $3,850 in March, breaking $40,000 for the first time last Thursday
Sergey Nazarov, co-founder of Chainlink, a decentralized network that provides data to smart contracts on the blockchain, said that there is a ‘lack of faith in traditional institutions that is driving this large rally towards cryptoassets.’
‘While outsiders may view the cryptocurrency industry being valued at over $1 trillion as an incredibly significant milestone, in actuality our space is still in one of its very early stages of development and growth,’ Nazarov said.
‘Bitcoin continues to defy all expectations, and doubters,’ Antoni Trenchev, co-founder and managing partner of crypto lender Nexo, told Bloomberg.
‘It’s leaving all other assets trailing in its wake, like it’s done year in, year out for the past decade.’
The market cap of all cryptocurrencies rose 10 percent to $1.042 trillion on Thursday, data from CoinMarketCap shows.
Bitcoin accounts for around 69 percent of the total market cap of the total. It is followed by Ethereum with a 13 percent share.
What is Bitcoin?
Bitcoin is a cryptocurrency – an online type of money which is created using computer code.
It was invented in 2009 by someone calling themselves Satoshi Nakamoto – a mysterious computer coder who has never been found or identified themselves.
Bitcoins are created without using middlemen – which means no banks take a fee when they are exchanged.
They are stored in what are called virtual wallets known as blockchains which keep track of your money.
One of the selling points is that it can be used to buy things anonymously.
However, this has left the currency open to criticism and calls for tighter regulation as terrorists and criminals have used to it traffic drugs and guns.
How are they created?
Bitcoins are created through a process known as ‘mining’ which involves computers solving difficult maths problems with a 64-digit solution.
Every time a new maths problem is solved a fresh Bitcoin is produced.
Some people create powerful computers for the sole purpose of creating Bitcoins.
But the number which can be produced are limited – meaning the currency should maintain a certain level of value.
Why are they popular?
Some people value Bitcoin because it is a form of currency which cuts out banking middlemen and the Government – a form of peer to peer currency exchange.
And all transactions are recorded publicly so it is very hard to counterfeit.
Its value surged in 2017 – beating the ‘tulip mania’ of the 17th Century and the dot com boom of the early 2000s to be the biggest bubble in history.
But the bubble appears to have now burst and questions remain over what market there is for it long-term.
Some shops and restaurants are accepting for purchases, but overall this is a tiny part of the market of the real economy.
While there are concerns Bitcoins can be hacked.