Bitcoin beat shares and gold in 2020written by Bella Palmer
The cryptocurrency broke through the $20,000 mark for the first time in mid-December
Bitcoin is set to finish the year with a bang, having surged more than 300 per cent in 2020.
The world's most popular cryptocurrency added 3 per cent yesterday to $28,599 (£21,014), having broken through the $20,000 mark for the first time in mid-December. It is a rapid turnaround for bitcoin, which has been branded a fad, is distrusted by its critics and is viewed with scepticism across the financial establishment.
But the cryptocurrency has defied detractors and has outperformed mainstream assets in 2020, including leading global stock indices, the dollar, gold, oil and copper.
The major reasons for its rise are hotly debated but it has become increasingly popular with investors looking for homes for their wealth during the pandemic.
It has also seen increasing demand from large US funds that are particularly fearful about the rampant central bank money printing that has taken place since the coronavirus took hold. There are now real concerns that inflation could shoot higher, forcing central banks to hike interest rates in 2021 as national debt has risen to over 100 per cent of GDP in both the US and the UK.
Bank of England chief economist Andy Haldane last week said that the vast amounts of Government spending and quantitative easing in the economy have made him 'super-vigilant' about a 'nasty inflation surprise'.
Bitcoin is seen as a hedge against inflation as its supply is capped at 21m. Fans argue that this relative scarcity will help it hold its value.
Some think that if inflation rises, then bitcoin could surpass $100,000 (£73,481) in 2021.
One leading financial analyst at Citi even predicts it could hit $318,000 (£233,633) by Christmas next year. Konstantin Anissimov, director at cryptocurrency exchange Cex.io, said: Safe assets on the market, such as government bonds and savings accounts, are in a worldwide crisis, providing limited returns and are being eaten away by inflation.
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