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Bitcoin Resurgence Leaves Institutional Acceptance Unanswered

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The Bitcoin hype machine is back in overdrive.

The digital token spiked above $13,000 this week for the first time in over a year, touching off Twitter dance parties, new sky-high predictions and even some tattoo flashing. Back are proclamations that crypto is the currency of the future, that the dollar’s days are numbered and blockchain will reorder the financial universe.

A mid-week announcement that PayPal Holdings Inc. will allow transactions in crypto set off the craze, adding about $19 billion to Bitcoin’s value over the following two days. It was the latest in a series of mainstream acknowledgments that digital tokens exist and clients want to trade in them. Wall Street stalwarts like Fidelity Investments have crypto investment products and two public companies -- Square Inc. and MicroStrategy Inc. -- recently said they bought Bitcoin.

But for all the hype, there’s little evidence that Bitcoin and its digital brethren are any closer to displacing fiat currencies. The use case -- what you can actually buy with Bitcoin -- remains flimsy. Instead, some critics argue, digital tokens have simply morphed into another asset class, similar to gold, and the sheen of institutional acceptance is simply proof that financial firms want to get in on the market for trading cryptocurrencies.

“The recent news regarding large corporations investing in BTC is helpful for sentiment and PR, but it is not something that most traditional investors will assign much value to,” said Meltem Demirors, chief strategy officer at CoinShares.

For many bystanders, some of the excitement this week elicited memories of the coin’s record run just a few years back, when sup...

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