Bitcoin’s price has hit a record high, climbing to almost $65,000 (£47,000) – and it is influencing other cryptocurrency markets.
The world’s second largest crypto coin, Ethereum, is at an all-time high of around $2,400 (£1,700), while meme currency Dogecoin has experienced a huge boost, reaching one cent for the first time ever.
Its price increased by more than 80 per cent in the space of 24 hours, according to cryptocurrency tracker CoinDesk.
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Why is Dogecoin’s price rising?
When Bitcoin’s value jumps, it often boosts the worth of other cryptocurrencies as well.
This is because some investors see these smaller cryptocurrencies such as Dogecoin as a cheaper alternative to Bitcoin, particularly as a shorter-term investment, and take advantage of the often volatile peaks and troughs.
Bitcoin has experienced a huge surge in 2021, buoyed by backing from the likes of Tesla and PayPal.
Tesla announced in February that it had invested $1.5 billion in Bitcoin, while PayPal is now allowing people to use the cryptocurrency to buy and sell on its platform.
Mastercard is also planning to start supporting Bitcoin payments later this year.
Bitcoin opened the year at around £21,000, having spent most of 2020 below £10,000. It reached £40,000 in February and briefly crashed, before rising again.
Dogecoin started the year valued at just $0.005, before its price shot up in late January, partly influenced by Elon Musk’s social media posts and the GameStop surge.
What could happen next?
Many experts are bullish about Bitcoin’s future, which is also good news for Dogecoin.
Simon Peters, analyst at investment platform eToro, said: “The dynamics have changed quite dramatically this year. Demand is flooding the market from institutions just as large amounts of Bitcoin and Ethereum are increasingly being taken offline and holders are transferring them to their own wallets.
“There is only one outcome from that, and investors should expect higher highs and higher lows throughout the year.
“In the short-term, we may soon see some profit-taking from some investors – a common theme that occurs when Bitcoin or its peers hit record peaks – but the long-term trend remains solid, with demand for alternative investments continuing.”
Coinbase, one of the largest cryptocurrency trading platforms, is currently preparing to go public. This could further boost Bitcoin’s value, experts have suggested.
Nick Spanos, co-founder of smart contract platform Zap.org, said: “The upcoming public debut of Coinbase is particularly exciting to both the mainstream market investors as well as crypto market enthusiasts.
“While the former will have a more direct opportunity to buy the shares of a company that plays a central role in Bitcoin and the crypto space, the latter are excited as Coinbase will open the gates for more conservative investors to embrace the coin, and perhaps other digital assets.”
However, it is worth remembering that cryptocurrencies are notoriously volatile, and can be a risky investment.
An advert for cryptocurrency exchange Coinfloor was banned by the Advertising Standards Authority last month for suggesting buying Bitcoin was a secure way to invest.