Cryptocurrency market capitalization neared the $3 trillion mark on Nov. 9 as the two biggest cryptocurrencies—Bitcoin and Ethereum—were trading just off their all-time highs, according to data from CoinMarketCap.
Bitcoin surged past the $68,000 mark for the first time on Monday, briefly touching a record high of around $68,500, according to Coinbase, with the world’s biggest cryptocurrency trading at $67,637 at 7:02 a.m. New York time on Nov. 9.
Ethereum, the world’s second-largest cryptocurrency, hit an all-time high on Monday of around $4,828, according to Coinbase, and was trading at $4,787 at 7:06 a.m. New York time on Nov. 9.
The Bitcoin and Ethereum surge helped push the total cryptocurrency market cap to $2.95 trillion earlier on Nov. 9, dipping to $2.92 trillion by 7:29 a.m. New York time, according to CoinMarketCap.
While there’s no single factor fueling the rally in crypto, which routinely experiences sharp price swings, analysts at Coinbase say inflation is a key driver of investor interest in cryptocurrencies.
“The inflation narrative still dominates the headlines and people are feeling the pinch globally,” Coinbase said in its weekly email on Nov. 5. “Whether it’s gas prices in the U.S., energy prices in Europe or food prices in Latin America, the headwinds of supply chain constraints and a shrinking labor force has investors looking for a store of value.”
Investors are closely eyeing two major data releases this week on inflation—one on producer input costs and the other on consumer prices.
On Tuesday, the Labor Department will release data for October’s producer price index (PPI), which tends to front-run consumer inflation data as at least some production costs get passed on to consumers. Economists expect a year-over-year rise of 8.7 percent in the PPI inflation measure, which would be the highest reading in the history of the series. Last month’s PPI came in at 8.6 percent, a record high.
And on Wednesday, the Labor Department will issue figures for October’s consumer price index (CPI), a key measure of inflation from the perspective of end consumers of goods and services. Consensus forecasts predict a year-over-rise of 5.3 percent in the CPI inflation gauge for October, with the prior months rise amounting to 5.4 percent, near a 30-year high.
Wells Fargo analysts said in a recent note it’s unlikely sticker-shock-weary consumers will see relief as the persistent supply-side crunch will “keep fanning the flames on inflation in the near term.”
Investors have increasingly tended to view cryptocurrencies as a hedge against inflation, with JPMorgan saying in a note early in October that “institutional investors appear to be returning to Bitcoin, perhaps seeing it as a better inflation hedge than gold.”
Vikram Pandit, chairman of The Orogen Group and former chief executive officer of Citigroup, said that every major financial institution will be thinking about trading cryptocurrencies within the next few years.
Speaking at the Singapore Fintech Festival event, Pandit said that in “one to three years, every large bank and/or securities firm is going to actively think about” trading cryptocurrency assets, according to Bloomberg.