The Bitcoin price touched an all – time high of more than £20,000

The price of bitcoin hit record highs over the Christmas period and touched $28,500 yesterday, setting it on track for its longest monthly winning streak in more than a year. The cryptocurrency has been rising in recent months, with the run of returns over October, November and December so far being its longest stretch since the middle of 2019.

The price has fallen by 4 per cent today and currently stands at $26,596 per coin, but this is still roughly $10,000 more a coin than a month ago and year lows in March which saw it dip below the $4,000 mark.

Someone who bought £1,000 worth of the cryptocurrency at the start of 2020 would have seen that turn into £3,750 today, a return of 275 per cent in less than a year. The surge has largely taken place during the second half of 2020, having initially seen the price fall to as low as $3,800 a coin in mid-March when investors were dumping assets of all kinds in a mass sell-off in response to the coronavirus.

But now, many see the cryptocurrency as a hedge against dollar weakness and the risk of faster inflation. Tom Stelzer, a crypto specialist at Finder, said: ‘Bitcoin has proven to be a valuable hedge, beating out traditional store-of-value assets like gold.’ Both eToro and Revolut, who allow British investors to buy and sell bitcoin on a regular basis, told This is Money that they had seen significant rises in apps and the number of bitcoin buyers at the time it reached a new all-time high in December.

A growing number of big-name investors and Wall Street giants have named bitcoin as a potential inflation hedge this year, looking to protect themselves against a wave of inflation they see on the horizon as a result of unprecedented government spending in the wake of the coronavirus pandemic.

With Joe Biden having anointed Ms Yellen as his treasury secretary, her anti-crypto sentiment has made some investors nervous that crippling regulations are in store for the surging digital currency. Bitcoin has achieved escape velocity from regulators. There is literally nothing they can do to stop it that doesn’t require them to print more fiat money which only makes the demand for bitcoin, and price, go higher.

Higher inflation and increased amounts of monetary stimulus from the US Federal Reserve will only increase bitcoin’s attractiveness as a store of value. Ms Yellen was the Federal Reserve chair from 2014 to 2018 and has recently stated that she wants the US Congress to spend more, stating that “the economy needs the spending”.

The fact that she is less concerned about debt and inflation will have a positive effect on the price of bitcoin. Her aggressive monetary and fiscal policies will cause many investors to become concerned about the inflation of the dollar.

Jesse Cohen  added: “But with bitcoin moving into the mainstream and capturing greater attention in the year ahead, it will likely draw further scrutiny from regulators in the United States and Asia.’’ While many expect the bitcoin rally to continue in 2021, I’m more concerned with what the Biden administration could mean for cryptos. Incoming Treasury Secretary Janet Yellen in the past has warned investors over bitcoin during her time as Fed Chair, calling it a highly speculative asset and not a stable store of value.