LONDON – Bitcoin rose above $50,000 on Tuesday to a new record high, building on a rally fuelled by signs that the world’s biggest cryptocurrency is gaining acceptance among mainstream investors.
Bitcoin hit a new high of $50,602, and was last up 3.3% at $49,537. It has risen around 72% so far this year, with most of the gains coming after electric carmaker Tesla said it had bought $1.5 billion in bitcoin.
It also said it would accept the currency as payment.
But Tesla was only the latest in a string of large investments that have vaulted bitcoin from the fringes of finance to company balance sheets and Wall Street dealing desks, as U.S. firms and traditional money managers have started to buy the cryptocurrency.
“The recent market conditions and events both in the crypto space and the financial world at large put such a price movement within the realm of possibility,” said Jacob Skaaning of crypto hedge fund ARK36.
“However, I’d like to offer a word of caution: While my long-term outlook is bullish, massive price fluctuations along the way are only to be expected. Bitcoin is still extremely volatile.”
The rush in 2021 by retail and institutional investors comes on top of a 300% rise last year as investors search for alternatives to the dollar because of the U.S. Federal Reserve’s 0% interest rates. It traded at a few hundred dollars only five years earlier.
What’s more, analysts suggest bitcoin’s limited supply could boost further gains for the virtual asset and that’s while the narrative of bitcoin becoming the digital gold gains traction.
“If that narrative comes to fruition, then the growth potential is off the charts as $50,000 per bitcoin equates to a market cap of roughly $931 billion, which is almost 9% of gold,” said John Wu, president at blockchain company Ava Labs.
“If BTC meets gold’s market cap, then that would be at least $500,000 per bitcoin.”
JPMorgan said in January that bitcoin emerged as a rival to gold and could trade as high as $146,000 if it becomes established as a safe-haven asset. That could mark a new dawn for the digital currency after years as a play for speculators and retail punters.
Bitcoin’s liquid supply is continuing to decrease, as investors increasingly acquire and “hodl” the asset for the long term. “Hodl” is crypto slang for the act of an investor holding the asset instead of selling it.
Meanwhile, smaller cryptocurrency ethereum edged 1.1% higher, just shy of its record high price of $1,874.98.
Bitcoin’s famous backers
Skeptics of the bitcoin’s ability to go mainstream say it is rarely used for regular transactions and is too volatile to be a reliable store of value or hedge against inflation.
But it has attracted endorsements from business people, celebrities and companies, betting bitcoin will become an alternative to central-bank issued currencies.
Here are some of bitcoin’s best-known backers:
The announcement by Musk’s electric vehicle company Tesla that it had bought $1.5 billion of bitcoin drove a roughly 20% surge in the cryptocurrency the day it was announced.
Tesla also said it hoped to begin accepting bitcoin as a form of payment in the near future.
The founder of Twitter and payment firm Square Inc is a bitcoin enthusiast and has said he believes the internet will have its own currency.
Square said in October it had bought around 4,709 bitcoins at an aggregate purchase price of $50 million. Twitter said in February it had considered holding bitcoin but had not yet decided.
The rapper has launched a bitcoin development fund with Jack Dorsey that says it will focus on the cryptocurrency’s adoption in India and Africa. Jay-Z and Dorsey are to invest 500 bitcoin, currently worth around $24.5 million, in the project.
Tyler and Cameron Winklevoss
The Winklevoss twins, best known for their lawsuit against Mark Zuckerberg over the founding of Facebook Inc, were early bitcoin investors and first said they put money into it in 2012. They established bitcoin exchange Gemini in 2015.
Paul Tudor Jones
The fund manager said in May 2020 there was a case for bitcoin as a “store of value” and that he had more than 1% of his assets invested in the cryptocurrency.
The billionaire investor said in a television interview in November 2020 that he had put money into bitcoin, saying it could outperform gold as a store of value.
The payments giant caused a bitcoin surge in October 2020 when it said customers could buy, sell and hold the cyrptocurrency — and other virtual coins — using its online wallets.
Novogratz, who used to run hedge funds for investment giant Fortress, is chief executive of Galaxy Investment Partners, one of the most prominent firms focused on investing in bitcoin, ethereum and other cyrptocurrencies.
The investment manager, who had a brief stint at the White House as head of communications for Donald Trump, announced at the start of this year that his firm had launched a bitcoin fund.
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