BITCOIN’s value has surged to almost £8,900 in the past 24hours but experts have warned prices could tumble if there’s a second coronavirus wave.
The digital cryptocurrency rose by 14 per cent from £7,760 ($9,903) yesterday morning to £8,855 ($11,300) overnight to reach Bitcoin’s highest price in almost a year.
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It last reached this height back in August 2019, although prices have fallen slightly to £8,370 ($10,679) at the time of writing.
The surge followed the news that US banks are planning to allow customers to hold digital currencies.
Gary McFarlane, Bitcoin analyst at investment platform interactive investor said: “Surprise news from the US that banks will be allowed to provide custody services for Bitcoin and other cryptocurrencies has lit a fire under the price of the virtual currency.”
Currently, Bitcoin and other virtual currencies can either be stored in digital wallets or you can invest in cryptocurrencies via a platform, and these platforms then hold your money for you.
But Mr McFarlane explains that US banks getting in on the act could help to eliminate the risk to consumers over where to hold their Bitcoins, although he points out banks are likely to focus on big businesses investing to begin with.
It’s thought savers worried about stock market dips may also be using Bitcoin and other cryptocurrencies in a similar way to gold; in a bid to try and preserve their capital.
The FTSE100 index tracking the UK’s largest companies crashed when the coronavirus crisis hit earlier this year to below 5,000 from around 7,500. It has since hovered around the 6,000 mark.
Mr McFarlane said: “The prospect of a covid-19 second wave has seen Bitcoin benefit in a similar way to gold by attracting safe haven interest from worried investors.”
But Bitcoin’s price can be volatile and it’s yet to reach highs of almost £16,000 ($20,419) last seen back in December 2017. That’s despite it being seen as the most popular of the cryptocurrencies.
Bitcoin’s value plummeted to £3,300 ($4,200) when the coronavirus crisis struck the UK in March and the US implemented a European travel ban.
The cryptocurrency has also been surrounded by controversy with Bitcoin scammers targeting the accounts of high profile Twitter users earlier this month.
Mr McFarlane said: “Bitcoin watchers will remember in March how its price fell just as hard – if not harder – than other financial assets, so if there is a reversal in the share market recovery, Bitcoin might not be immune.”
It’s thought a second wave of the coronavirus pandemic could strike the UK in winter when temperatures fall.
And only today, Prime Minister Boris Johnson warned that Europe was on the verge of a second wave as he defended the government’s decision to quarantine travellers from Spain.