Source: Joao Luiz Bulcao/Hans Lucas [Reuters]
The Market Online - At The Bell

Join our daily newsletter At The Bell to receive exclusive market insights

  • Bitcoin hit a new record yesterday, climbing to US$62,741 (roughly A$82,047) just days before crypto exchange Coinbase is due to go public in the United States
  • A growing mainstream acceptance of bitcoin as an investment and form of payment has firmly cemented it as the world’s largest cryptocurrency
  • However, bitcoin’s meteoric rise has led major investment banks to warn of a speculative bubble, with many fund managers warning of a sharp pull-back
  • Coinbase is due to begin trading on the NASDAQ on Wednesday, with a reference price of US$250 (roughly A$326.93) per share expected to value the company at US$49.19 billion (roughly A$64.33 billion)
  • Coinbase will go public through a direct listing rather than a traditional initial public offering (IPO), meaning it will not raise any money and existing investors will not be bound by restrictions governing when they can divest their holdings

Bitcoin hit a new record yesterday, climbing to US$62,741 (roughly A$82,047) just days before crypto exchange Coinbase is due to go public in the United States.

A growing mainstream acceptance of bitcoin as an investment and form of payment has firmly cemented it as the world’s largest cryptocurrency, with gains of almost five per cent on Tuesday adding to an already massive increase in value so far this year.

Likewise, bitcoin’s smaller rival, ethereum, also hit an all-time high of US$2205 (roughly A$2883).

According to data from market trackers CoinGecko and Blockfolio, the overall cryptocurrency market capitalisation hit a record of US$2 trillion (roughly A$2.62 trillion) earlier this month.

“When bitcoin markets create new highs, the price often range-trades and we witness a round of profit-taking,” said James Butterfill of digital asset manager CoinShares.

“During this most recent period, we have witnessed a similar profit-taking round, which now looks to have run its course.”

Major firms like BNY Mellon, Mastercard and Tesla are among some of the biggest names to champion bitcoin, with Tesla adding US$1.5 billion (roughly A$1.96 billion) worth of the digital asset to its balance sheet earlier this year.

“Demand is flooding the market from institutions just as large amounts of bitcoin and ethereum are increasingly being taken offline and holders are transferring them to their own wallets,” noted Simon Peters, an analyst at multi-asset investment platform eToro.

“There is only one outcome from that, and investors should expect higher highs and higher lows throughout the year.”

The multifold rise in cryptocurrencies is also driven by investors seeking high-yielding assets in an environment of low interest rates.

However, bitcoin’s meteoric rise has led major investment banks to warn of a speculative bubble. Several fund managers surveyed by the Bank of America and Deutsche Bank have said Bitcoin was in “bubble” territory and expect it to pull back sharply.

The listing of Coinbase’s shares on the NASDAQ, which is due to begin on Wednesday, is expected to value the company at US$49.19 billion (roughly A$64.33 billion) based on a reference price of US$250 (roughly A$326.93) per share.

Interestingly, Coinbase has opted to go public through a direct listing rather than a more traditional initial public offering (IPO). This means the company will not raise any money and existing investors will not be bound by restrictions governing when they can divest their holdings.

While much less common than an IPO, direct listings have been gaining traction in recent years. Previous high-profile direct listings include Spotify in 2018, Slack Technologies in 2019 and Roblox earlier this year.

More From The Market Online

Australia and New Zealand seen as top places for business

Australia has moved up the ranks in terms of its 'reputation' and ease of doing business,…