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Bitcoin rose 1.7 per cent to US$31,567 as of 10:31 a.m. in London. The wider Bloomberg Galaxy Crypto Index added 0.9 per cent.
On Monday, Bitcoin slid as much as 17 per cent, the biggest drop since March, after breaching US$34,000 for the first time over the weekend. The swings are a reminder of the famed volatility of the largest cryptocurrency, whose price has more than quadrupled over the past year.
More institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so. While some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.
Headwinds for now
For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth.
“The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year,” the strategists wrote. “While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between US$50,000-US$100,000, we believe that such price levels would prove unsustainable.”