Bitcoin surges 20% to date in January, rekindling memories of crypto bubble

Bitcoin rallied after climbing out of the downward price channel it's been trading in for weeks.
Bitcoin rallied after climbing out of the downward price channel it's been trading in for weeks.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Bitcoin is off to its best start to a year since 2012, gaining about 20 per cent in two weeks amid a renewed enthusiasm that is reviving memories of the mania of a few years ago.

The world's largest virtual coin rallied after climbing out of the downward price channel it's been trading in for weeks, rising as much as 8.9 per cent to US$8,854, the highest since November. So-called altcoins were doing even better, with Dash and bitcoin more than doubling and Bitcoin Cash up 60 per cent.

"When bitcoin goes up, our customers usually start buying altcoins as they tend to follow the leader," said Steve Ehrlich, chief executive officer of crypto-asset broker Voyager Digital.

As was the case during the 1,400 per cent surge that took place in 2017 that pushed bitcoin into the mainstream, multiple reasons are being cited for the optimism. The move upward coincides with the debut of new options linked to the digital currency.

"The price was slated to move up in general and the CME launch probably added fuel to it," said Vijay Ayyar, Singapore-based head of business development at crypto exchange Luno, referring to CME Group beginning to trade options on Bitcoin futures. "Most people think this could be the beginning of a new uptrend."

The latest rally appears to be a breakout following an extended downturn going back to August. Gains will remain volatile unless bitcoin is able to breach the US$9,500 (S$12,798) level, "which would indicate a higher high for the first time," Ayyar said.

Bitcoin's almost 20 per cent gain in the first two weeks of the year followed a volatile 2019, in which early optimism from investors over the announcement of Facebook's Libra crypto project gave way to skepticism and intense regulatory scrutiny. Bitcoin still almost doubled last year.

The wider industry continues to work toward mainstream adoption while awaiting greater regulatory clarity in markets including the US on issues such as a Bitcoin ETF product. Meanwhile, there is widespread debate whether the upcoming "halving" - a scheduled reduction in the amount of Bitcoin produced in mining to control inflation - will serve as a fresh driver for gains.