New York: Cryptocurrencies are on course for their biggest weekly surge since the last bubble in Bitcoin peaked about three years ago and ahead of a spectacular crash.
The Bloomberg Galaxy Crypto Index - which includes Bitcoin, Ether and three other digital coins - has rallied about 40 per cent so far this week. That's the most since a 55 per cent climb over a similar period in December 2017.
Cryptocurrencies are becoming emblematic both of the exuberance in financial markets as well as of the concern that the pace of gains is unsustainable. Believers in Bitcoin, which broke through $40,000 for the first time Thursday, see it as a maturing asset that provides a hedge against dollar weakness and inflation risk. Others worry that the rally is untethered from reason and fueled by vast swathes of fiscal and monetary stimulus.
Commentators have pointed to a range of potential sources of demand for cryptocurrencies, ranging from rampant speculation by stuck-at-home day traders to increased purchases by institutional and corporate investors. The potential for "upside of historic proportions" suggests investors should keep buying Bitcoin and Ether, according to Rich Ross, a technical strategist at Evercore ISI.
But in a note Wednesday he also described the outlook as "tulip-like", a reference to the 17th century mania for tulip bulbs that led to one of history's most infamous market bubbles and crashes. The total market value of cryptocurrencies surpassed $1 trillion for the first time this week after a fivefold climb in the past year, data from tracker CoinGecko shows. (CoinGecko's figures cover more than 6,000 coins.)
Bitcoin slumped as much as 17 per cent on Monday before recovering and jumping to fresh highs.