Wall Street largely took a pause on Wednesday morning, holding at or near record highs for many major market benchmarks. Investors are looking for some guidance from the Federal Reserve, which is in the middle of its last monetary policy meeting of 2020. What the Fed decides, as well as what Washington lawmakers put together for a possible stimulus package, could have big implications for the future direction of the stock market. As of 10:45 a.m. EST, the Dow Jones Industrial Average (^DJI 0.82%) was down 19 points to 30,180. However, the S&P 500 (^GSPC 0.59%) gained 5 points to 3,699, and the Nasdaq Composite (^IXIC 0.55%) moved further into record territory with a gain of 26 points to 12,621.
Many investors have looked for alternatives to stocks in the current environment, and that's led to a surge in the price of cryptocurrencies. In particular, bitcoin has been moving sharply higher in the past few months, and on Wednesday, the crypto token set a new record high of its own.
Bitcoin hits new records
The price of bitcoin rose to $20,650 shortly after 10:45 a.m. EST. The token had climbed as high as $20,820, eclipsing its former intraday high just below $20,000 for the first time.
The move puts to rest the many doubts that those following the cryptocurrency market have had for several years. The last time bitcoin traded near these levels was in late 2017. Since then, the cryptocurrency has gone through several sharp corrections, including a decline of more than 80% between late 2017 and early 2019.
Many investors believed that those all-time highs three years ago represented a bubble from which the bitcoin market would never recover. However, recent nervousness about the extreme measures that national governments around the world have had to take during the COVID-19 pandemic stoked the thesis for using bitcoin as an alternative to sovereign fiat currencies for storing value.
Bitcoin has very different advocates now
In those three years, though, there's been a huge shift in thinking about cryptocurrencies. Most importantly for bitcoin bulls, many large institutions have added exposure to bitcoin and other crypto tokens:
- Electronic payment provider Square (SQ 2.54%) made a $50 million investment in bitcoin just a couple months ago, having added bitcoin availability to its Cash App quite a while ago.
- More recently, PayPal Holdings (PYPL 3.54%) followed suit by offering bitcoin, Ethereum, and other crypto token purchases and sales on its own payment platform.
- Several notable institutional investors have made massive allocations in their portfolios to bitcoin in recent months, including insurance company MassMutual's $100 million bitcoin investment and MicroStrategy's (MSTR 5.90%) decision to raise $550 million in debt to buy the cryptocurrency.
Ordinary investors have also followed suit. In addition to direct bitcoin investment, the Grayscale Bitcoin Trust (GBTC 4.91%) has exploded in popularity, reaching $13 billion in assets under management. Despite trading at a premium of as much as 30% in recent weeks, demand for the Grayscale fund remains strong.
At this point, there are many predictions about what's next for the cryptocurrency markets, including some forecasts for $100,000 or $1 million price points for bitcoin that many investors find outlandish. The big question is what's motivating more institutional investors to take interest in bitcoin. If cryptocurrency is finally winning over mainstream institutions as an asset class to take seriously, then there could indeed be more upside for bitcoin and other crypto token prices.