Bitcoin moved to within touching distance of its all-time high on Thursday with the recent rally in prices also supporting a rise in alternative cryptocurrencies.
The largest digital currency by market cap (currently around $17.5 billion) was trading around $1,1090 at the time of publication, not far off the record high of $1,165.89 set on November 30, 2013, according to CoinDesk data. Bitcoin did trade as high as $1,153.02 earlier in the day before paring some gains in what has been a volatile day of trade.
“A lot has happened in the time between the all-time high in 2013 and now. The industry has grown a lot and become stronger, through innovation, and endurance. Additionally, the adoption and popularity of Bitcoin are much higher than they were back then. More and more people are beginning to recognize the benefits and value of the currency,” said Marco Streng, CEO of Genesis Mining, a bitcoin mining start-up.
A number of factors highlighted previously by CNBC have contributed to the recent rally in bitcoin which rose nearly 130 percent in 2016. Bitcoin has benefited as a safe-haven as China imposes currency controls and the yuan devalues. Geopolitical uncertainty as well as professional investors taking an interest in the asset class have also helped bitcoin’s popularity. Fears of capital controls in China – the biggest market for bitcoin – have also contributed to support for the virtual currency.
Another big event this year was in June when a change in bitcoin’s underlying rules meant those who were “mining” the cryptocurrency – a process whereby users are awarded with a bitcoin if they solve complex mathematical puzzles in order for a bitcoin transaction to go through – received less rewards. This was due to the process known as “halving,” which essentially reduces the supply of bitcoin.
Diversifying blockchain portfolio
But bitcoin – the largest cryptocurrency – has also boosted interest in alternative digital assets. Ether – the second-largest cryptocurrency by market capitalization – has seen its price increase around 55 percent from December 28 to January 5. Monero, another digital currency, is up 27 percent in the same period.
The story is the same for many of the other alternative coins or “alt coins” as they are known in the industry. Experts said that the bitcoin rise has given investors confidence in these other currencies.
“The bitcoin price surge is enabling traders in this space, who tend to be bitcoin heavy, to diversify their blockchain asset portfolios, and allocate greater weight to other cryptocurrencies such as ether, which until recently have been relatively undervalued,” Aurélien Menant, founder and CEO of Gatecoin, told CNBC by email.
“Blockchain asset traders with extensive experience in more traditional financial markets are likely to be wary of the recent bitcoin price surge and instead of cashing out into fiat currencies, that may be equally volatile this year, are heading to alternative blockchain assets.”
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