Investors ramp up crypto spree as bitcoin nears record high

Australian investors have pounced on the plunge in bitcoin earlier this year and have been ramping up exposure to the cryptocurrency

Investors in Australia have been quickly increasing their exposure to cryptocurrency as bitcoin trades close to its record high, analysts said on Monday, placing a bold bet that could pay off handsomely.

Earlier this year, bitcoin plunged from its record of around $109,000 on January 20 - the day U.S. President Donald Trump was inaugurated - to a low of about $90,000 in March.

But the world’s largest digital asset has since recovered briskly and crossed the key $100,000 level last week for the first time since February. Bitcoin extended that rally on Monday to trade near $105,000.

Bitcoin’s resilience amid a broader selloff in financial markets and a pessimistic outlook from economists has prompted some analysts to place even more bullish price calls on the volatile coin.

Analysts at JPMorgan Chase have said they expect bitcoin to drop to $48,000 by the fourth quarter as the cryptocurrency trades at "exuberant" valuations.

But other analysts remain bullish on bitcoin, with those at Standard Chartered going as far as to tip prices to hit $200,000 this year.

Bitcoin has soared in recent months amid optimism over the potential of Web3 technology, which aims to decentralise the internet and could usher in a new wave of innovation.

The cryptocurrency has also drawn interest from macro investors seeking an inflation hedge in a rapidly changing economic landscape.

Bitcoin's price movements are notoriously volatile and can be influenced by a variety of factors, including changes in market sentiment, government policy, and macroeconomic trends.

Earlier this year, bitcoin's price came under pressure from a selloff in riskier assets as the Federal Reserve began to raise interest rates and chart a more hawkish monetary policy.

However, bitcoin has since recovered briskly and is now trading at nearly 10-month highs. This recovery has been driven by a number of factors, including renewed interest in Web3 technology and bitcoin's role as an inflation hedge in a rapidly changing economic landscape.

As the cryptocurrency market continues to evolve, it will be interesting to see how investors react to the latest developments and what impact they have on bitcoin's price.output: Investors in Australia have pounced on the plunge in bitcoin earlier this year and have been rapidly increasing exposure to the cryptocurrency in a bold bet that could pay off handsomely, analysts said on Monday, placing a pessimistic outlook on the outlook for equities.

Australian investors upped their allocation to cryptocurrencies in the first quarter, enticed by the stellar returns and the promise of more gains as the cryptocurrency market recovered briskly from a dismal 2022, an analysis of capital flows showed.

The shift in investor preference was particularly striking given that the Australian share market also performed well in the first quarter, with the benchmark S&P/ASX200 index rising by 10.4%.

However, investors chose to reduce their exposure to Australian equities, preferring instead to increase their allocation to cryptocurrencies, which saw a steeper recovery from last year’s selloff.

A Bank of International Settlements report last month showed that cryptocurrency market activity had slowed in the first quarter, with volumes in futures, options and other derivatives declining from the record highs seen in 2022.

Despite the reduced activity, institutional investor interest in cryptocurrencies remained elevated throughout 2022 and into 2023, as investors sought new avenues for generating returns in a challenging macroeconomic environment.

The Australian investors’ move to increase their cryptocurrency holdings comes amid a broader selloff in financial markets and a pessimistic outlook from economists.

Standard Chartered's analysts are among the few bullish on bitcoin this year, with their latest price target standing at $200,000. They previously predicted that bitcoin would reach $150,000 by the end of 2023.

However, JPMorgan Chase analysts have said they expect bitcoin to drop to $48,000 by the fourth quarter as the cryptocurrency trades at "exuberant" valuations. They advise investors to prefer equities over bitcoin in the second half of 2023.

In March, Australian investors were also seen reducing their exposure to U.S. equities, which are now valued at 16.8% of total portfolio holdings, down from 17.5% at the fourth quarter of 2022. This move might be linked to the recent selloff in the U.S. stock market.

After a stellar performance in 2022, which saw the S&P 500 index rise by 25%, the U.S. equities market encountered some turbulence in the first quarter of 2023.

The S&P 500 index experienced a decline of 0.8% in the first quarter, and it encountered further volatility in recent months amid concerns over rising inflation, interest