Bitcoin Heads To $ 50K As Tesla Goes Mainstream

TOKYO (Reuters) – Bitcoin quickly approached the $ 50,000 mark on Tuesday as the persistence of Tesla’s Elon Musk-led investment in cryptocurrency prompted investors to believe it could become an asset class general public for companies and fund managers.

The most popular cryptocurrency has gained 1150% from the March 2020 lows as institutional investors seek alternative wealth stores and retail traders ride the wave. It was trading for a few hundred dollars just five years ago.

On Monday, it jumped 20% after Tesla announced it had invested $ 1.5 billion and would ultimately take cryptocurrency as payment for its cars. It was his biggest daily increase in more than three years.

The price of one bitcoin hit a high of $ 48,216 – almost enough to buy one of Tesla’s best-selling vehicles, the Tesla Model Y SUV. Ethereum, the rival cryptocurrency, hit a record high of 1,784.85 $ Tuesday.

By 9.46 GMT, the pace of the rally had cooled and was trading flat.

Musk, a well-known proponent of cryptocurrencies, plans to accept the currency as payment for Tesla cars and analysts believe this is a bigger change as companies and big investment houses follow suit. small traders in the asset.

“Bitcoin is definitely catching the attention of investors – I’m getting more and more questions about it,” said Marija Vertimane, senior strategist at State Street Global Markets.

“From a practical standpoint, using Bitcoin to buy anything – Tesla cars – would still be extremely difficult given its excessive volatility.

Bitcoin’s volatility has been a hindrance for some serious investors. The realized volatility, or daily price fluctuations measured in terms of the closing price for Bitcoin over the past 90 days, was 72% versus 16% for the S&P 500 stock index and 6% for the euro currency.

Yet in BofA’s January survey of fund managers, bitcoin topped the list of the most crowded transactions. Another survey, carried out by Deutsche Bank, warned of price bubbles in cryptocurrency.

FIRST PHASES

Billionaire Musk has long been a cryptocurrency fan – he spoke about it online – but Tesla’s hard currency investment came as a surprise that put a rocket under the industry.

“Right now, it still seems a bit of a quiet quest to acquire bitcoin. But I think that by the end of the year, with the current rate of institutional inflows, it will become clear that this is a once in a lifetime land grab, ”said Jehan Chu, founder and managing partner of Kenetic, which invests in blockchain-related companies.

Bitcoin has already risen 67% this year, on top of a 300% rally last year, as investors seek alternatives to the dollar due to the US Federal Reserve’s 0% interest rates. The dollar slipped against most currencies on Tuesday. [FRX/]

“We are in a position where these are the early phases of an allocation to bitcoin from the institutional and corporate community,” Michael Bucella, partner at crypto investment firm BlockTower said on CNBC.

In the ongoing digital wave, central bankers and regulators, especially in China, are also starting to embrace their own digital currencies for everyday use, a major break with the conventional workings of global finance.

Beijing will issue 10 million yuan ($ 1.55 million) in digital currency to residents that can be used during the Lunar New Year holiday starting Thursday, national media reported.

However, Vitor Constancio, former vice president of the European Central Bank, wrote on Twitter that policymakers should focus on regulating cryptocurrencies and only develop digital currencies if they help banks in their creative role. credit.

“Bitcoin prices should appear in ‘commodity’ listings, not forex columns,” he said.

Graphics: Bitcoin hits record high Tesla investment:

Tesla’s news-led rally has spread beyond bitcoin. Shares of companies that provide trading platforms for bitcoin and the technology to “mine” cryptocurrency have surged in China, South Korea and Australia, and large computer chipmaking companies such as SK Hynix have also increased.

Even dogecoin, a joke cryptocurrency with a dog as a symbol, saw its value rise after Musk mentioned it on Twitter. It jumped 13% in the past day, according to CoinMarketCap. Chinese company Feitian Technologies Co Ltd, which makes technology for digital payments, rose 4.47% on Tuesday.

“It really has become popular culture and mainstream,” Chu said. “People no longer ask why should I invest in bitcoin, they have to defend why they aren’t.”

($ 1 = 6.4493 Chinese yuan)