After breaking through the key $20,000 level for the first time on Wednesday, leading digital currency bitcoin is soaring again. As of 10:50 a.m. EST on Thursday, bitcoin was trading for more than $23,200, a gain of about 11% over the past 24 hours and a rally of more than 25% over the past week.
As a result of the move, several cryptocurrency stocks are trading higher as well. In no particular order:
- Grayscale Bitcoin Trust (GBTC -9.12%), which owns bitcoin and allows investors to invest in the cryptocurrency indirectly, is up by 16% on today's move.
- Marathon Patent Group (MARA -14.04%), a publicly traded cryptocurrency mining company, is up by more than 18% today.
- Canaan (CAN -10.91%), which manufactures hardware used in bitcoin mining, is up by 15% thanks to bitcoin's move.
In addition to these, Square (SQ -0.59%), which not only facilitates bitcoin buying and selling through its Cash App, but owns a significant amount of bitcoin as an investment, was higher by nearly 4%. MicroStrategy (MSTR -7.96%), which bought more than $400 million in bitcoin to hold already and is planning to raise capital to buy even more, is also higher on the day.
There are several potential reasons why bitcoin has been moving sharply higher.
Fears of currency devaluation is a big one. Many bitcoin investors believe that the massive amounts of stimulus being injected into economies around the world (read: money being printed), will lead to high inflation. Since there is a finite supply of bitcoin in existence, it is thought of as a naturally inflation-resistant asset, similar to gold.
There has also been an uptick in institutional interest in bitcoin. I already mentioned that Square and MicroStrategy are now holding bitcoin on their balance sheets, and these are just two corporate examples. A U.K. asset manager with over $27 billion in assets under management recently revealed that about 2.5% of its assets were invested in bitcoin.
Additionally, there is renewed hope that bitcoin could finally begin to achieve mainstream adoption as a payment method. While PayPal (PYPL 0.47%) recently announced that its customers would be able to buy and sell bitcoin through the platform, the company also said its long-term plans include making bitcoin usable as a payment method with its 13 million merchants.
At the current price level, bitcoin's market capitalization is about $425 billion -- making all of the bitcoin in existence roughly as valuable as Walmart. If institutional demand continues and bitcoin ends up gaining mainstream traction, there could certainly be more upside ahead. But it's also important for investors to know it's not a smooth ride. Bitcoin can move to the downside just as quickly, so invest accordingly.