- The price of bitcoin hit a high above $51,700 on Wednesday after breaking $50,000 on Tuesday.
- But JPMorgan said the rally looked unsustainable unless bitcoin’s volatility falls.
- Bitcoin’s market capitalization has skyrocketed to close to $1 trillion.
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The price of bitcoin hit a record high above $51,700 on Wednesday after soaring past $50,000 for the first time on Tuesday. The surge brought the biggest cryptocurrency’s market capitalization to close to $1 trillion.
The price has rocketed by about 78% in 2021, continuing an astonishing rally after dipping below $4,000 last March. Its market cap has grown by more than $700 billion since the end of September.
Bitcoin was up 4.6%, to $50,817.80, as of 9:40 a.m. ET, having earlier hit an intraday record of $51,719.11.
Analysts have said that record amounts of monetary and fiscal stimulus are boosting the price by flooding markets with cash and creating fears about inflation and currency debasement.
Tesla’s announcement earlier in February that it had snapped up $1.5 billion worth of bitcoin has powered the latest leg of the rally. Interest from big Wall Street names such as BlackRock, BNY Mellon, and Mastercard has also given cryptocurrencies legitimacy.
However, analysts at JPMorgan said on Tuesday that the high volatility remained a problem for the digital asset.
They said bitcoin was far more volatile than gold, which many crypto enthusiasts are hoping bitcoin can replace as a store of value in investors’ portfolios. One measure, called three-month realized volatility, was at 87% for bitcoin compared with 16% for gold, they said.
“In our opinion, unless bitcoin volatility subsides quickly from here, its current price … looks unsustainable,” the analysts said.
JPMorgan also said that its analysis found that the rapid rise in bitcoin over the past five months had “taken place with relatively little institutional flows.”
“Some pickup in real money flows would likely be needed to sustain current prices in the absence of a re-acceleration of the retail flow,” the note said.