Dubai: Bitcoin, known for its volatile swings, breached past the $3,000 (Dh11,000) mark to see a fresh peak despite the split between two factions of the industry that led to the creation an offshoot called Bitcoin Cash (BCC).
Bitcoin (BTC) witnessed a record high of $3,360.87 yesterday, after gaining $1,000 in three months, according to data from coindesk. The cryptocurrency has gained more than 200 per cent in the past one year. Bitcoin last traded at $3,247.24, off its peak.
This record run is despite differences on how to fundamentally enhance the speed of processing transactions that led to the split. The new technology, BCC, has so far witnessed a lukewarm response from traders.
“The split emerged from a Bitcoin group’s desire to conquer high transaction fees and a Bitcoin size limit that made mining larger blocks invalid,” Promoth Manghat, CEO, UAE Exchange told Gulf News by email.
“My take is that the rally that you see now is driven by speculation. There is a growing belief that Bitcoin prices are going to go up in the long term and this has become self-fulfilling prophesy. The wider international recognition and potential regulatory approval for the proposed Bitcoin ETF [Exchange Traded Fund] are events that can create upsides,” Manghat said.
Doubling of levels
Bitcoin may even double from the current levels before December, according to a technical analyst, who did not wish to be named. “There was a fresh breakout on Saturday, which took it to a new all-time high. This happened despite a sharp correction a few weeks ago. This shows that the main trend is still bullish and the corrective trend was utilised to add more positions,” said the analyst. “We may see a 100 per cent extension of the previous move. Bitcoin may target $4,000 in the short term.”
Bitcoin hit a low of $1,824 on July 16. In comparison, ethereum has not mirrored moves in Bitcoin, and is trading at $256, about 40 per cent lower from its recent peak of $412.2 struck on June 12.
“Ethereum will continue to underperform bitcoin and may at least target its previous high,” said the technical analyst.
Portfolio diversification
According to Ari Paul, co-founder of BlockTower Capital, lack of co-relation between equities and Bitcoin can be used by fund managers to diversify their portfolios.
“If I have a portfolio of low risk stocks, and I add a highly volatile asset like BTC to it, my risk goes down because the more volatile BTC has a low co-relation with equities,” Paul said on his Twitter page. “It’s co-relation and not volatility that drives the overall portfolio risk. What adds the risk is high co-relation,” he said.
The S&P has gained 8 per cent since the start of the year compared to Bitcoin’s gains of 255 per cent.
BitOasis back in game
Local exchange BitOasis which does not deal in BCC, restarted transactions last week after the spilt took place. “All deposits, withdrawals, send and receive of BTC have been re-enabled on our platform,” the exchange said on its Twitter page. The exchange disabled transactions on its platform on Tuesday last week, pending the finalisation of the split and the return of stability to the network.
