Bitcoin surged to another record, pushing past $60,000 as a rally fuelled by the $1.9 trillion US Covid-19 relief package took the digital asset's price increase to about 1,000 per cent over the past year.
The world's biggest cryptocurrency rose by 6.1 per cent to trade at $60,935.43 at 1.20pm UAE time on Sunday.
Optimism that the US stimulus package, which was passed last week in Washington, would help the US economy stage a quick recovery from the coronavirus-induced slowdown led to a jump in the value of Bitcoin.
“That definitely is one of the reasons why all markets are rallying, including the price of Bitcoin,” said Vijay Valecha, chief investment officer at Century Financial in Dubai. “There is abundant liquidity in the market.”
Bitcoin is bouncing back from a 20 per cent fall in the last week of February after rising bond yields and volatility in global equities prompted a sell-off of risky assets by investors.
The sell-off followed a rally in the digital currency that pushed it past $50,000 in February, a few days after it topped a January peak of $42,000.
The cryptocurrency's gains have “completely overshadowed the returns seen in traditional US indices as well as commodities like crude oil”, said Mr Valecha.
“Over the past 12 months, the returns look even more lucrative,” he said.
Mr Valecha said the “fear of missing out [and] limited coin supply, which is capped at 21 million coins” is also driving up its price.
However, critics believe speculation is fuelling the rally and have said that the wild swings prove that Bitcoin is not a valid medium of exchange.
“Something with a long-term volatility of 80 per cent cannot be considered a medium of exchange,” said Goldman Sachs’ Sharmin Mossavar-Rahmani last month.
US Treasury Secretary Janet Yellen also echoed Ms Rahmani's views.
Their criticism came after European Central Bank governing council member Gabriel Makhlouf said Bitcoin investors should be prepared to “lose all their money”.
That stands in stark contrast to the endorsement the digital currency received last month from Tesla, which said it is investing $1.5 billion into Bitcoin and will soon start accepting it as a mode of payment for its cars
BNY Mellon, one of the oldest lenders in the US, said it plans to include digital currencies in the list of its services, while MasterCard said it will support "select crypto currencies" on its network.
Uber also plans to start accepting Bitcoin and other cryptocurrencies as a form of payment if it benefits the business and if there is a need for it, according to its chief executive Dara Khosrowshahi.
“Given that buying Bitcoin has become a lot easier now, and more companies are involved in this space, we believe there is another massive rally ... on Bitcoin’s horizon,” said Avatrade's chief market analyst Naeem Aslam in a note to investors on Friday.
Globally, regulators consider cryptocurrencies as a threat to monetary stability amid fears that they could be exploited by money launderers and criminals.
Some central banks are considering issuing their own digital currencies that can co-exist with privately issued cryptocurrencies as the dual monetary system evolves, the IMF said in a blog post in February.