‘Extreme’: Bitcoin warning as cryptocurrency surges

The world’s most popular cryptocurrency is surging in value, making investors rich overnight – but there’s something you need to know.

As the world’s most popular cryptocurrency Bitcoin price surges past $42,000 for the first time, millions are asking whether they should jump on-board and invest.

The digital coin has more than quadrupled in value since the start of 2020, with the currency’s total value now past $US600 billion ($A780 billion).

Australian market analyst Kyle Rodda said Bitcoin’s latest surge is “knocking over record high after record high right now” but he brings the price surge down to “a high degree of mania”.

He compares the recent uptick to the surge we saw in 2017 before it plummeted again in early 2019.

Some analysts aren’t buying into the crypto bubble. Picture: Ozan Kose / AFP

“Bitcoin’s price action is exhibiting bubble-like characteristics, similar to what was seen in the 2017 crypto boom,” Mr Rodda told news.com.au.

“The rally over the last fortnight has been extreme, and looks very little to do with changes in market fundamentals,” he added.

“We’re in a very hot market right now, and I suspect that Bitcoin has once again become something of a speculators play thing.”

Mr Rodda said cryptocurrency is a “divisive asset” that’s splitting investors down the middle.

Bitcoin is a “divisive asset” that’s splitting investors down the middle. Picture: Jack Guez / AFP

“The notion that this surge in its value is perhaps a little over the top can be something of affront to some,” he said.

“The mania we’re seeing in Bitcoin right now is probably irrational, but it doesn’t necessarily diminish the case for owning Bitcoin.

“In the short-term, the market is going mental, and you’d be brave to take a punt on Bitcoin at current prices,” he added.

“In saying that, there’s a case to be made for owning Bitcoin in the long run, at the right price, and if you are willing to wear a little pain.”

Bitcoin has reached $42,000 a coin. Picture: Ina Fassbender / AFP

WHAT IS BITCOIN?

The digital coin, which was invented by an unknown person or group of people using the name Satoshi Nakamoto, exists without a central bank and can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.

According to Forbes, the latest bull run began in October after PayPal announced it would begin offering Bitcoin and cryptocurrency support.

Citibank and JPMorgan have also been making bullish Bitcoin forecasts.

SHOULD I BUY BITCOIN?

There is speculation Bitcoin could become an alternative to gold – the traditional safe-haven investment.

A leaked report from Citi in December referred to the cryptocurrency as “21st century gold”.

“A large part of what we have seen for Bitcoin in the last 12 months is a market looking for alternative stores of value and new ways to diversify in a world of zero per cent interest rates and ultra-loose monetary policy – buying Bitcoin as if it were ‘digital gold’,” Mr Rodda told news.com.au.

The cryptocurrency has been dubbed the “21st century gold”.

Binance, a cryptocurrency exchange, announced gleefully that Bitcoin had surged from $US32,0000 ($A43,000) to $US33,000 ($A44,200) in less than 45 minutes, triggering excitement among investors.

Byron Goldberg, Australia head of global cryptocurrency company Luno, believes the recent rise is just the beginning of a wild ride for cryptocurrency in 2021.

“Search trends for Bitcoin are only starting to rise, still only a fraction of what they were at the peak of the 2017 high, implying we are only at the beginning of the bull run,” he told news.com.au.

“This bullish news also relieves the tension that this rally is a momentum rally being lead by irrational speculators.”

He added that other cryptocurrencies are also getting a solid run.

“Ethereum has had a tremendous run over the past 48 hours,” he said. “It seems like 2021 should be a good year for Ethereum too.”