Bitcoin hits record high as investors pull away from government debt

Donald Trump has become a champion of cryptocurrency - Mark Humphrey/AP Photo Bitcoin surged to an all-time high on Monday as it outpaced gold as the fastest-growing investment this year.

The world’s original and most popular cryptocurrency hit a record $123,205 following a 14pc gain in the past week, crystallising an increase of almost a third since the start of the year.

It later eased back below $120,000.

The bitcoin price has doubled in 12 months, outstripping a 38pc gain in the ever-rising gold price and an 11pc increase on the benchmark US S&P 500 index.

The latest surge came as investors ditched long-term government bonds in Germany and France, pushing the yields – the cost of borrowing – to levels seldom seen since the 2009-11 eurozone crisis.

Yields on US, Japanese and UK debt also remained elevated as investors push up borrowing costs on fears that many wealthier countries are living beyond their means.

Bitcoin’s remarkable rally looks to have been fuelled by the arrival in Congress of a raft of crypto-friendly legislation, spearheaded by crypto convert Donald Trump, in what legislators have dubbed “Crypto Week”.

The so-called Clarity Act will set up an oversight regime for digital assets and cryptocurrencies.

By setting out when a cryptocurrency is classified as a commodity or security, it aims to deliver the regulatory certainty that big investment managers, banks and hedge funds need before they can pile in.

The House of Representatives will also debate a law that would block the US Federal Reserve from creating a digital currency.

This is ostensibly to protect citizens’ privacy from government snooping on transactions, but will also prevent any public stablecoin from rivalling or crowding out the market-based players.

The third bill in the House, the so-called Genius Act, has already passed the Senate.

This law would set up a regulatory framework supporting the use of stablecoins as a payment mechanism, which could spur innovation and take-up of cryptocurrencies.

“House Republicans are taking decisive steps to deliver the full scope of President Trump’s digital assets and cryptocurrency agenda,” said House Speaker Mike Johnson.

Democratic Party senator Elizabeth Warren last week voiced concerns with the package, telling a Congressional committee that it could amount to “an industry handout”.

She also fretted that the laws could inject cryptocurrencies’ trademark volatility into the mainstream financial markets.

Mr Trump once called bitcoin “a scam”, but last year became the industry’s highest-profile champion.

In March, he pledged to create a strategic reserve made up of five cryptocurrencies, with the aim of making the US “the crypto capital of the world”.

Story ContinuesHe and his family have invested in bitcoin, crypto mining, stablecoins and, most eye-catching, the meme coins $Trump and $Melania.

Other cryptocurrencies have also rallied as “Crypto Week” begins. Ether, the second-most popular cryptocurrency, cracked $3,000 on Monday, its highest level since February. XRP, the third-most popular token, has gained 25pc in the past week.

Meanwhile, European long-term bond yields climbed.

Investors worried about the economic impact of a trans-Atlantic trade war, following Mr Trump’s threat to slap a 30pc tariff on goods from the EU.

Germany’s 30-year yield of 3.24pc was near highs seldom seen since 2011, while the 30-year yield in France, where a debt-strapped minority government will make budget announcements on Tuesday, was the highest since 2009.

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