Bitcoin Reaches New Highs As Tesla Goes Mainstream

TOKYO, Feb.9 (Reuters) – Bitcoin extended its gains on Tuesday to an all-time high as the persistence of Tesla Inc’s investment in cryptocurrency prompted investors to believe it would become a large asset class public for companies and fund managers.

Bitcoin has more than doubled in two months as institutional investors seek alternative wealth stores and retail traders ride the wave. Monday’s jump after Tesla’s announcement was its biggest daily increase in more than three years.

It traded at a record high of $ 48,216 in late Asian afternoon on Tuesday. Ethereum, the rival cryptocurrency, had hit a record high of $ 1,784.85 early in the morning.

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.

The US dollar has collapsed against most currencies.

Analysts believe Tesla’s announcement that it had bought $ 1.5 billion worth of bitcoin and that it would take cryptocurrency as payment for cars is part of a larger shift as businesses and large investment houses follow small traders in the asset.

“While you can now buy a Tesla with Bitcoin, I wouldn’t suggest doing so,” Michael Bucella, a partner at crypto investment firm BlockTower, told CNBC. “We are in a position where these are the first phases of an allocation to bitcoin from the institutional and corporate community.”

Bitcoin has already risen 62% this year, on top of a 300% rally last year, as investors seek alternatives to the greenback due to the US Federal Reserve’s 0% interest rates .

Central bankers and regulators, especially in China, are also starting to embrace their own digital currencies for everyday use, a major departure from the conventional workings of global finance.

“Digital currencies, it seems clear to us, are going to become a growing part of the financial architecture and potentially very broadly portfolios in the future,” said Ben Powell, chief investment strategist for APAC at the ‘BlackRock Investment Institute on CNBC.

“It’s not just news in the United States regarding the bitcoin situation, but in China we have a rollout of the Chinese digital currency with so-called ‘red packages’.”

Tesla boss Elon 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.

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.

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

In addition, the Chinese are expected to send each other billions of yuan over a week’s vacation through chat apps like WeChat – digital versions of traditional “ red packet ” envelopes filled with cash. ($ 1 = 6.4493 Chinese renminbi yuan) (Written by Stanley White)