Bitcoin has continued its end-of-year Santa Claus rally, surging to a new high of more than $28,500.
The cryptocurrency gained more than 5% to hit $28,572 on Wednesday. It is up 47% since the start of December and is on track for its biggest monthly gain since May 2019.
Bitcoin has almost quadrupled in value this year as interest from institutional investors has grown.
As the US dollar has declined, bitcoin has become a more attractive investment amid concerns that huge government stimulus packages prompted by the coronavirus pandemic will fuel inflation. In the US, a bigger package could be passed once Joe Biden has replaced Donald Trump as president.
On Wednesday the dollar dropped to its lowest level since April 2018, when measured against a basket of currencies. The US currency is under pressure as investors move into riskier assets, betting on a strong economic recovery next year as coronavirus vaccines are rolled out. The vaccine developed by Oxford University and AstraZeneca was approved in the UK on Wednesday.
Bitcoin has also been boosted by expectations that it will become a more mainstream payment method. PayPal has launched a crypto trading service on its platform and has reportedly bought nearly 70% of all new bitcoin in circulation. A number of hedge fund managers have revealed this year that they have invested in the cryptocurrency.
Bitcoin is even being touted as an alternative to gold. Gold, the traditional safe-haven investment, has declined since hitting a record high of more than $2,000 an ounce in August, and is now flat at $1,879 an ounce. Some analysts expect gold and bitcoin to battle it out for dominance next year.
Paolo Ardoino, the chief technology officer of the crypto exchange Bitfinex, said bitcoin could draw more interest from a broader audience, not just fund managers. “While a growing institutional presence has been part of the narrative of the current bull run, we may see increased retail interest in bitcoin as a form of digital gold,” he said.
Other cryptocurrencies such as Ether have also rallied. However, concerns remain about the speculative nature of cryptocurrencies, and there are regulatory issues. Last week the US Securities and Exchange Commission accused Ripple Labs and its senior executives of misleading investors in XRP, the third largest cryptocurrency, by selling $1bn of the virtual tokens without registering with the agency.