Bitcoin Shoots Past $20,000. Why It’s the Best-Performing Investment of the Year.

Bitcoin crossed US$20,000 on Wednesday for the first time, the latest milestone in a rally that has made it the best-performing investment of 2020. Bitcoin was trading just above $20,500 on Wednesday morning, up 180% for the year.

Bitcoin has crossed $19,000 several times this year, after first hitting that number in 2017. But it consistently faltered just before hitting $20,000 and had fallen below $4,000 as recently as March.

It is nearly impossible to explain Bitcoin’s price changes, but analysts had described $20,000 as a key psychological level—like other big round market numbers that don’t mean very much on their own.

The rise has been fueled this year by institutions, which have been growing more comfortable with Bitcoin and even holding some on their balance sheets. Massachusetts Mutual Life Insurance Company (MassMutual), an institution that has been around for 169 years, announced last week that it had bought $100 million in Bitcoin, joining companies like Square (ticker: SQ) that have already bought in.

The enthusiasm is filtering down to retail investors, who now have more options to buy crypto, including through their PayPal Holdings (PYPL) accounts.

News that big companies are buying in “swells consumer interest,” says Nigel Green, founder and CEO of deVere Group, a financial advisory and fintech firm.

There is no generally accepted way to value Bitcoin, and it produces no cash flows. But high demand can spur price increases, because the cryptocurrency’s software limits its supply to 21 million. More than 18.5 million Bitcoins have already been created.

If Bitcoin can hold this level, some analysts are predicting sharp moves higher.

“If Bitcoin is able to stay meaningfully above $20,000 for a few days, we would expect prices to move significantly higher over the next six months,” says Greg King, CEO of Osprey Funds, the digital asset subsidiary of REX Shares.

But exciting numbers like $20,000 can be dangerous with a volatile asset like this. Cryptocurrency exchange OKEx and blockchain data firm Kaiko released a report this month showing that large traders tend to sell their positions just as smaller traders jump in — meaning the “smart money” may be unloading crypto as soon as they see hype-fueled rallies like this. And with selling pressure, the price can turn south in a hurry.

“When Bitcoin rallies, the market tends to forget previous, long-drawn-out bearish stretches, and the sentiment shifts to manic euphoria,” the report notes.

China’s securities regulator is ramping up support for the country’s embattled equities markets, announcing measures to funnel capital into Chinese stocks.

The aim: to draw in more medium to long-term investment from major funds and insurers and steady the equities market.

The latest round of policy boosts comes as Chinese stocks start the year on a soft note, with investors reluctant to add exposure to the market amid lingering economic woes at home and worries about potential tariffs by U.S. President Trump. Sharply higher tariffs on Chinese exports would threaten what has been one of the sole bright spots for the economy over the past year.

Thursday’s announcement builds on a raft of support from regulators and the central bank, as officials vow to get the economy back on track and markets humming again.

State-owned insurers and mutual funds are expected to play a pivotal role in the process of stabilizing the stock market, financial regulators led by the China Securities Regulatory Commission and the Ministry of Finance said at a press briefing.

Insurers will be encouraged to invest 30% of their annual premiums earning from new policies into China’s A-shares market, said Xiao Yuanqi, vice minister at the National Financial Regulatory Administration.

At least 100 billion yuan, equivalent to $13.75 billion, of insurance funds will be invested in stocks in a pilot program in the first six months of the year, the regulators said. Half of that amount is due to be approved before the Lunar New Year holiday starting next week.

China’s central bank chimed in with some support for the stock market too, saying at the press conference that it will continue to lower requirements for companies to get loans for stock buybacks. It will also increase the scale of liquidity tools to support stock buyback “at the proper time.”

That comes after People’s Bank of China in October announced a program aiming to inject around 800 billion yuan into the stock market, including a relending program for financial firms to borrow from the PBOC to acquire shares.

Thursday’s news helped buoy benchmark indexes in mainland China, with insurance stocks leading the gains. The Shanghai Composite Index was up 1.0% at the midday break, extending opening gains. Among insurers, Ping An Insurance advanced 3.1% and China Pacific Insurance added 3.0%.

Kai Wang, Asia equity market strategist at Morningstar, thinks the latest moves could encourage investment in some of China’s bigger listed companies.

“Funds could end up increasing positions towards less volatile, larger domestic companies. This could end up benefiting some of the large-cap names we cover such as [Kweichow] Moutai or high-dividend stocks,” Wang said.

Shares in Moutai, China’s most valuable liquor brand, were last trading flat.

The moves build on past efforts to inject more liquidity into the market and encourage investment flows.

Earlier this month, the country’s securities regulator said it will work with PBOC to enhance the effectiveness of monetary policy tools and strengthen market-stabilization mechanisms. That followed a slew of other measures introduced last year, including the relaxation of investment restrictions to draw in more foreign participation in the A-share market.

So far, the measures have had some positive effects on equities, but analysts say more stimulus is needed to revive investor confidence in the economy.

Prior enthusiasm for support measures has hardly been enduring, with confidence easily shaken by weak economic data or disappointment over a lack of details on stimulus pledges. It remains to be seen how long the latest market cheer will last.

Mainland markets will be closed for the Lunar New Year holiday from Jan. 28 to Feb. 4.

Bitcoin Shoots Past $20,000. Why It’s the Best-Performing Investment of the Year.

The latest round of policy boosts comes as stocks start the year on a soft note.