UPDATE 1-Bitcoin hits $40,000 for first time, but pullback likely imminent

(Adds details, analyst comment)
By Gertrude Chavez-Dreyfuss and Chuck Mikolajczak
NEW YORK, Jan 7 (Reuters) - Bitcoin topped $40,000 for the
first time on Thursday, as it continues a rally that has seen
the digital currency climb more than 700% from a March 12
closing low.
Increased demand from institutional, corporate, and more
recently retail investors has powered bitcoin's surge this year,
attracted by the prospect of quick gains in a world of ultra-low
yields and negative interest rates.
The world's most popular cryptocurrency climbed as high as
$40,402.46 and was last up 6.1% at $39,100 BTC=BTSP . It
crossed $30,000 for the first time on Jan. 2 and $20,000 on Dec.
16.
Smaller coins ethereum ETH=BTSP , the second largest in
terms of market capitalization, and XRP XRP=BTSP , the fourth
biggest, gained 1.8% at $1,231 and 31% at 32 U.S. cents,
respectively. Both currencies often move in tandem with bitcoin.
Some investors viewed bitcoin as a hedge against inflation
amid enormous monetary stimulus aimed at battling the economic
devastation caused by COVID-19.
Market participants though warned a correction could be in
the cards after a scorching rally.
"While further growth is inevitable, investors should not
expect this to move in a straight line," said Gavin Smith, chief
executive officer of cryptocurrency consortium, Panxora Group.
"The reality is that bitcoin is far from being a magic money
tree, nor is it free from downward price swings. In fact, we can
expect dips as sharp as 25% at times as investors periodically
withdraw profits," he added.
Bitcoins surge happened as the market cap for the entire
cryptocurrency sector topped $1 trillion on Thursday, according
to data trackers CoinMarketCap and CoinGecko. Glassnode, which provides insight on blockchain data, noted
that retail interest in bitcoin has increased the last few
weeks, with the number of bitcoin addresses or wallets holding a
"non-zero amount" of the virtual currency reaching an all-time
high of more than 33 million.
The information provider also said while interest in bitcoin
and news coverage have grown, it is far from being in bubble
territory. The number of daily new bitcoins has still not
reached 2017 levels, Glassnode said, suggesting the currency is
experiencing strong organic growth in adoption, but not the sort
of "viral growth typical of a bubble."