HONG KONG – The price of bitcoin has risen above $9,000, extending a rebound that has made cryptocurrencies far outperform traditional asset classes this year.
Bitcoin on Monday reached $9,396.33, a 13-month high, according to CoinDesk, a research site. While stocks, bonds, gold and oil are all up this year, bitcoin’s rally trounces them all. Prices for bitcoin and rival digital currencies collapsed last year.
Investors cite more institutional support for cryptocurrencies, escalating trade turmoil between the United States and China, and Facebook’s planned digital coin as catalysts for the latest move higher.
Facebook has signed up more than a dozen companies – including Visa, Mastercard, PayPal and Uber – to back its cryptocurrency, The Wall Street Journal reported last week. A digital coin, Libra, is set to launch next year.
Though bitcoin and the underlying blockchain technology are rarely used for payments, Facebook is betting that its giant social network with billions of users will gravitate toward its crypto-based payments system. Investors, for their part, say a company of Facebook’s stature using a cryptocurrency gives the industry wider appeal.
“When big, important companies get involved, crypto enters the zeitgeist in a different way,” said Rayne Steinberg, chief executive and co-founder at Arca, an asset-management firm that invests in digital currencies. He said the US-China trade tensions have been a positive catalyst for bitcoin.
The cryptocurrency was formed about a decade ago as a decentralized, autonomous network that isn’t controlled by any individual, company or government. That decentralized aspect has made it particularly attractive to some investors who have grown disenchanted with the world’s two largest economies engaging in a bitter trade dispute.
“In this digital world where you have an unseizable, unmanipulatable, uninflatable asset that acts as a store of value, there is going to be a demand for that,” Steinberg said.
Additionally, bitcoin has separated itself from most other asset classes on a performance basis. The S&P 500 is up 15 percent this year, US crude-oil futures have gained nearly 15 percent and gold futures are up about 5 percent.
Bitcoin has more than doubled, although it is well below its all-time high near $20,000.
Hacks, scams and fraud remain key concerns. But there are bright spots.
In a research report earlier this month, Anthony Pompliano, a founding partner at asset-management firm Morgan Creek Digital, said bitcoin was acting as a hedge against global instability and moving differently compared with other asset classes.
SFOX, an institutional crypto prime dealer, found that there was “a near perfect negative correlation” between the S&P 500 and bitcoin in May after China announced plans to raise tariffs on $60 billion of US goods.
“This is the core argument for why institutional investors should have exposure to the cryptocurrency,” Pompliano said.