Bitcoin prices tested their highest levels on record Tuesday as investors continue to pile cash into the world's most popular cryptocurrency amid sluggish gains for gold and a weaker U.S. dollar.
Bitcoin prices have more than doubled over the past six months, compared to a 4.7% gain for spot bullion prices and modest outflows for gold ETFS amid a drive for alternatives to benchmark equity indices as central bank and government stimulus erodes the value of fiat currencies. The U.S. dollar index, which tracks the greenback against a basket of its global currency peers, has fallen 7.5% over the same period as the Federal Reserve's balance sheet swelled to more than $7 trillion, thanks in part to its myriad efforts to support the coronavirus-damaged economy.
Analysts have also noted that the cryptocurrency's rise has been fueled not only by retail investors and traditional digital coin speculators, but also by a concerted shift of cash from institutional funds.
The Grayscale Bitcoin Trust (GBTC) - Get Grayscale Bitcoin Trust Report, the cryptocurrency's biggest trust provider and a benchmark for tracking institutional investor activity is up 134% over the past six months and has assets of more than $8.4 billion.
"Bitcoin's continued rally is challenging our previous assessment that overbought positions by momentum traders such as CTAs could potential trigger profit taking or mean reversion flows over the near term," JPMorgan analysts noted in a recent report lead by strategist Nikolaos Panigirtzoglou.
"The failure to see mean reversion flows kicking in recent weeks might reflect the smaller role of momentum traders such as (commodity trading advisors) in bitcoin trading vs. their role in more traditional asset classes, such as gold and other commodities."
"The ascent of Grayscale suggests that bitcoin demand is not only driven by the younger cohorts of retail investors, i.e. millennials, but also institutional investors such as family offices and asset managers," JPMorgan added.
Bitcoin prices on the Bitstamp platform were marked 4.5% higher in early Monday deal to suggest a transaction price of $19,408.00 each, a moves that extends Bitcoin's 2020 gain to around 170% and pegs it just 2% from the all-time peak of $19,783.06 reached in December of 2017.