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Bitcoin hit a record high on Thursday after a summer rally powered by scores of companies racing to buy the cryptocurrency, but later fell back as signs of inflationary pressure in the US hit markets.
The world’s biggest digital asset climbed to a new peak of $124,480 in early trading, eclipsing its previous all-time high in July.
It has been lifted by the flood of companies loading up on the coin and by President Donald Trump’s executive order opening US retirement plans to crypto investments.
The highly volatile price fell back to about $118,000 by late afternoon in London after data showed a bigger than expected rise in US wholesale prices that also hit stocks, leaving it down about 4 per cent on the day.
For the broader investment community, bitcoin has become a barometer of the level of risk-taking in financial markets.
Andrew Pease, head of investments for Asia-Pacific at Russell Investments, said it was behaving like a “souped-up version of the Nasdaq”, the tech-heavy US stock index.
Bitcoin’s record high comes after Bullish, a cryptocurrency exchange backed by tech billionaire Peter Thiel, made its debut on the New York Stock Exchange on Wednesday in an initial public offering that raised $1.1bn. The shares were priced at $37 and surged to $118 in the afternoon, before closing at $68.
Trump last week ordered US agencies to allow the $9tn retirement market to invest in alternative assets, including cryptocurrencies, paving the way for a surge of institutional investment into the sector. Trump has fiercely championed the crypto industry since returning to the White House, and industry executives have in turn raised millions of dollars for the president’s election fund.
The price of bitcoin has risen 26 per cent so far this year, boosted by companies across the world rushing to buy.
So-called bitcoin treasury companies are booming in popularity as struggling companies seek to revive their share prices by acquiring the coin, and as digital asset investors find a way to value their tokens more highly than by holding them directly.
Globally, 165 public companies hold bitcoin, according to data provider Coinkite.
Led by US bitcoin evangelist Michael Saylor’s Strategy, crypto treasury companies typically raise debt and equity to fund purchases of bitcoin and other cryptocurrencies. Trump’s family media business is an active participant, having raised $2bn this summer to spend on bitcoin.
Such companies are “creating a positive feedback loop for cryptocurrency prices”, said Will Owens, research analyst at Galaxy Digital. He said they had “evolved from a novel capital allocation experiment into a structural source of buying pressure in crypto markets”.
But Owens cautioned that a downturn in investor appetite, crypto prices or the ability of treasury companies to tap capital markets could cause an unravelling. Companies that raised lots of debt “may suffer brutal drawdowns in less favourable market conditions”, he said.
Some groups have branched out beyond bitcoin to snap up other tokens. US-listed SharpLink Gaming raised $400mn on Monday to spend on buying ether, and holds about $3bn worth of the token.
Ether also hit a fresh high on Thursday, reaching $4,788 before giving up earlier gains to fall to $4,570 by late afternoon in London.
Bitcoin’s previous record high was $123,153 in July, during Washington’s “Crypto Week”, when the US Congress passed landmark laws overseeing stablecoins.