By Steven Russolillo
The price of bitcoin rose above $9,000, extending a rebound that has made cryptocurrencies far outperform traditional asset classes this year.
Bitcoin climbed to $9,381.82 over the weekend, a 13-month high, according to research site CoinDesk. While stocks, bonds, gold and oil are all up this year, bitcoin's rally trounces them all.
Prices for bitcoin and rival digital currencies collapsed last year. Investors cite more institutional support for cryptocurrencies, escalating U.S.-China trade turmoil and Facebook Inc.'s planned digital coin as catalysts for the latest move higher.
Facebook has signed up more than a dozen companies including Visa Inc., Mastercard Inc., PayPal Holdings Inc. and Uber Technologies Inc. to back its cryptocurrency, The Wall Street Journal reported on Friday. The digital coin, called Libra, is set to launch next year.
Though bitcoin and the underlying blockchain technology are hardly used for payments, Facebook is betting that its giant social network with billions of users will gravitate toward its crypto-based payments system. And investors say a company of Facebook's stature using a cryptocurrency gives the industry wider appeal.
"When big, important companies get involved, crypto enters the zeitgeist in a different way," said Rayne Steinberg, chief executive and co-founder at Arca, an asset-management firm that invests in digital currencies.
He said the U.S.-China trade tensions have been a positive catalyst for bitcoin. Bitcoin was formed about a decade ago as a decentralized, autonomous network which isn't controlled by any individual, company or government. That has made it particularly attractive to some investors who have grown disenchanted with the world's two largest economies engaging in a bitter trade dispute.
"In this digital world where you have an unseizable, unmanipulatable, uninflatable asset that acts as a store of value, there is going to be a demand for that," Mr. Steinberg said.
Additionally, bitcoin has separated itself from most other asset classes on a performance basis. The S&P 500 is up 15% this year, crude-oil futures have gained 16% and gold futures are up 4.8%. Bitcoin, meanwhile, is up 154%, although it is still well below its all-time high near $20,000.
Hacks, scammers and fraud remain key concerns. But there are bright spots. In a research report earlier this month, Anthony Pompliano, a founding partner at asset-management firm Morgan Creek Digital, said bitcoin was acting as a hedge against global instability, citing how bitcoin moved differently to most other asset classes.
SFOX, an institutional crypto prime dealer, found that there was "a near perfect negative correlation" between the S&P 500 and bitcoin in May after China announced plans to raise tariffs on $60 billion of U.S. goods.
"This is the core argument for why institutional investors should have exposure to the cryptocurrency," Mr. Pompliano said.
Write to Steven Russolillo at email@example.com
(END) Dow Jones Newswires
June 17, 2019 10:13 ET (14:13 GMT)
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