Bitcoin Tops $20,000 for First Time

The move above $20,000 is the latest bullish sign for cryptocurrencies, which after years of operating in the fringe are beginning to be taken more seriously by professional investors.

A string of well-known investors and companies have publicly unveiled bitcoin holdings this year, including hedge-fund managers

Paul Tudor Jones

and

Stanley Druckenmiller,

insurance giant Massachusetts Mutual Life Insurance Co. and other companies including

Square Inc.

and

MicroStrategy Inc.

The record came after the U.K. investment firm Ruffer Investment Management disclosed that it was holding about $744 million of bitcoin.

The $20,000 level “is a very symbolic threshold to reach at the end of what has been a historic year for bitcoin,” said Michael Sonnenshein, managing director of Grayscale Investments, which manages trust funds that invest in bitcoin and other cryptocurrencies.

Grayscale has been a big beneficiary of the new wave of investors. Its assets under management this year have risen to more than $13 billion from $2 billion at the start of the year.

Bitcoin is also attracting a new crowd of individual investors. Firms such as Robinhood Markets Inc., Square,

PayPal Holdings Inc.

and Webull have opened up crypto trading to their customers, making it easier for new investors to invest.

These new investors are driving the price higher at least partially for the same reason other assets are rising: the falling value of the U.S. dollar. With the Federal Reserve driving down interest rates and indicating it will let inflation run hot for years, investors are looking for alternative assets that can operate as a hedge.

Bitcoin, for all its volatility, has been touted as a dollar hedge by its supporters, though that status has yet to be proved. Its previous intraday high of $19,921 was set Dec. 1, but it had languished for the past two weeks until this morning’s surge, which came around 8:30 a.m. ET.

The digital currency also hovered just below $20,000 in 2017 but never got over the hump and eventually tumbled into a years’ long bear market.

Jean-Marie Mognetti, chief executive of investment-management firm CoinShares, said the cryptocurrency market has advanced since bitcoin’s last run at $20,000. The 2017 rally was primarily retail-driven and the infrastructure couldn’t handle the demand, he said.

“Everything was shaking. Every API was falling down, every exchange was out of service,” he added, while noting bitcoin passed $20,000 without any issues on Wednesday.

So far this year, bitcoin is up about 184%, which is far above the returns for most traditional assets. But in the crypto sector, it isn’t even the top performer. Ether, the in-house currency of the Ethereum network, is up nearly 360% in 2020 and climbed 6% to $620 on Wednesday.

The price gains and influx of new investors have fueled interest from traditional exchange operators, which hope to introduce new markets for products linked to cryptocurrencies in a bid to win business from institutional investors.

Exchange giant

CME Group Inc.

said Wednesday that it was launching futures contracts on ether, the second-largest digital currency after bitcoin. Futures are derivatives contracts that track other markets ranging from oil to wheat to the S&P 500. Traders will be able to use CME’s ether futures to bet on anticipated increases or decreases in the digital currency or to protect themselves against adverse price moves.

CME’s ether contracts are set to begin trading in February, pending regulatory review. The announcement comes nearly three years to the day after the Chicago-based exchange giant commenced trading in bitcoin futures, a launch that came at the peak of the 2017 frenzy in bitcoin. Ether would be only the second cryptocurrency to have a futures contract at CME.

Earlier this week, CME’s crosstown rival

Cboe Global Markets Inc.

also indicated that it was dipping its toe back into cryptocurrencies, a reversal after it abandoned its own struggling bitcoin-futures contract last year. Cboe said it was joining with CoinRoutes, a software firm that offers trading tools for digital assets, to disseminate data on cryptocurrency markets to Cboe clients.

—Alexander Osipovich contributed to this article.

Write to Paul Vigna at paul.vigna@wsj.com