Bitcoin surpasses $ 20,000 for the first time

The move above USD 20,000 is the latest bullish sign for cryptocurrencies, which are starting to get more serious by professional investors after years of operating on the fringes.

A range of well-known investors and companies have publicly disclosed bitcoin holdings this year, including hedge fund managers Paul Tudor Jones and Stanley Druckenmiller, insurance giant Massachusetts Mutual Life Insurance Co. and other companies, including Square Inc.

and MicroStrategy Inc.

The record came after British investment firm Ruffer Investment Management announced it owned approximately $ 744 million worth of bitcoin.

The $ 20,000 level “is a very symbolic threshold to reach at the end of a historic year for bitcoin,” said Michael Sonnenshein, director of Grayscale Investments, which manages trust funds investing in bitcoin and other cryptocurrencies.

Grayscale has benefited a lot from the new wave of investors. Assets under management have grown to more than $ 13 billion this year from $ 2 billion at the start of the year.

Bitcoin is also attracting a new wave of individual investors. Companies such as Robinhood Markets Inc., Square, PayPal Holdings Inc.

and Webull have opened up crypto trading to their clients, making it easier for new investors to invest.

These new investors are driving the price up at least in part for the same reason that other assets are rising: the falling value of the US dollar. With the Federal Reserve cutting interest rates and indicating that it will keep inflation high for years to come, investors are looking for alternative assets to hedge.

Bitcoin, despite all its volatility, has been touted by its supporters as a dollar hedge, although that status has yet to be proven. The previous intraday high of $ 19,921 was set on December 1, but it had been languishing for the past two weeks until this morning’s rise, which came around 8:30 a.m. ET.

The digital currency also floated just below $ 20,000 in 2017, but never got over the hump, eventually falling into years of bear market.

Jean-Marie Mognetti, CEO of investment management firm CoinShares, said the cryptocurrency market has moved up since bitcoin’s last run at $ 20,000. The 2017 rally was mainly focused on retail, and the infrastructure couldn’t handle demand, he said.

Everything was shaking. Every API fell apart, every exchange was out of order, ”he added, noting that bitcoin passed $ 20,000 on Wednesday without a hitch.

So far this year, bitcoin is up about 184%, which is well above the returns of most traditional assets. But in the crypto sector, it isn’t even the best performer. Ether, the internal currency of the Ethereum network, is up nearly 360% in 2020 and is up 6% on Wednesday to $ 620.

The price increases and the influx of new investors have sparked the interest of traditional exchange operators, who hope to introduce new markets for products linked to cryptocurrencies in an effort to bring in clients from institutional investors.

Exchange giant CME Group Inc.

said Wednesday it was launching futures contracts on ether, the second largest digital currency after bitcoin. Futures are derivative contracts that track other markets, ranging from oil to wheat to the S&P 500. Traders will be able to use CME’s ether futures to bet on expected increases or decreases in the digital currency or to protect themselves against unfavorable price movements.

CME’s airwaves contracts will start in February, pending review by regulatory authorities. The announcement comes nearly three years after the Chicago-based exchange giant began trading bitcoin futures, a launch that came at the height of the 2017 bitcoin frenzy. Ether would only be the second cryptocurrency to have a futures contract with CME.

Earlier this week, CME’s crosstown rival was Cboe Global Markets Inc.

also indicated that it dipped its toe back into cryptocurrencies, a reversal after giving up its own struggling bitcoin futures contract last year. Cboe said it joined CoinRoutes, a software company that offers digital asset trading tools, to distribute cryptocurrency market data among Cboe customers.

—Alexander Osipovich contributed to this article.

Write to Paul Vigna at [email protected]