Bitcoin hit a new record high Wednesday, as the 6.2% year-on-year increase in U.S. consumer prices for October fed investor mania for the digital currency.
It recently traded at $68,349, up 2%, after hitting a peak of $68,744 earlier in the day.
Bitcoin has made huge strides since its 2009 inception, with a lot of volatility along the way. Less than four months ago, it dropped below $30,000.
Bitcoin now “seems to now be fueled by the sustained inflation that we are witnessing across all the world’s major economies,” Sui Chung, chief executive of CF Benchmarks, a cryptocurrency benchmarks administrator, told Bloomberg.
Bitcoin advocates have been clamoring for some time that the digital asset represents a hedge against inflation. But given that inflation was quiescent until this year and that Bitcoin has shown so much volatility, it’s difficult to judge that in a definitive way.
What’s clear now is that Bitcoin is a speculative vehicle. Whether it turns into something more than that is anyone’s guess. Its unstable value has kept it from being used much as payment for goods and services, outside of illegal activity.
Advocates call it a hedge against stocks and fiat currencies. But there’s not enough evidence yet to support that view.
If enough of the investment community believes in Bitcoin and acts on that belief, it’s here to stay. But it’s not clear we’re there yet.
The Federal Reserve and Treasury could create a digital dollar that eliminates the need for another digital currency. And a sustained plunge by Bitcoin could make investors lose interest.