Bitcoin Powers Towards $50K as Tesla Takes it Mainstream | Inquirer
 
 
 
 
 
 

Bitcoin Powers Towards $50K as Tesla Takes it Mainstream

/ 06:04 AM February 09, 2021

Bitcoin was fast approaching the $50,000 mark on Tuesday as the afterglow of Elon Musk-led Tesla’s investment in the cryptocurrency had investors reckoning it may become a mainstream asset class for both corporations and money managers.

The most popular cryptocurrency has gained 1,150% from March 2020 lows as institutional investors search for alternative wealth stores and retail traders ride the wave. It traded at a few hundred dollars only five years back.

Monday, it leaped 20% after Tesla announced it had a $1.5 billion investment and that it would eventually take the cryptocurrency as payment for its cars. That was its most considerable daily rise in more than three years.

ADVERTISEMENT

One bitcoin’s price climbed to a peak of $48,216 — almost enough to buy one of the best-selling Tesla vehicles, the Tesla Model Y SUV. Rival cryptocurrency ethereum struck a record high of $1,784.85 on Tuesday.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

Musk and Tesla

Musk, a well-known supporter of cryptocurrencies, foresees accepting the currency as a payment for Tesla cars. Analysts reckon this is a larger shift as companies and big investment houses follow small traders into the asset.

“Bitcoin is definitely capturing investors’ attention — I get more and more questions about it,” said Marija Vertimane, senior strategist at State Street Global Markets.

“From a practical point of view, using bitcoin to buy anything – Tesla cars – would still be extremely difficult given its excessive volatility.”

Bitcoin’s volatility has hindered some serious investors and a sticking point in using it for transactions. Realized volatility, or daily price swings measured in terms of closing prices for Bitcoin over the past 90 days, was 72% compared with 16% for the S&P 500 stocks index and 6% for the euro currency.

What’s more, with bitcoin’s value tripling in the past three months, analysts raised questions over how its volatility would affect someone buying a Tesla car in bitcoin.

“Unless the price of bitcoin stabilizes, either bitcoin’s price falls drastically, and you end up having won a Tesla in a lottery, or its price triples, and you end up paying your Tesla far too expensive,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

ADVERTISEMENT

For example, if someone bought a Tesla Model 3 for one bitcoin on Sunday – when it traded for $38,000 – the same car could be bought for just 0.8 bitcoin on Tuesday when the cryptocurrency traded $46,413 as of 1145 GMT.

Earliest Phases

Billionaire Musk has long been a cryptocurrency fan – he has talked them up online – but Tesla’s hard currency investment came as a surprise that has put a rocket under the sector.

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

Still, in BofA’s January fund manager survey, bitcoin topped the list of “most crowded” trades. Another survey by Deutsche Bank warned of price bubbles in the cryptocurrency.

Bitcoin is already up 67% this year, on top of a 300% rally last year, as investors search for alternatives to the dollar because of the U.S. Federal Reserve’s 0% interest rates. The dollar slid against most currencies on Tuesday. [FRX/]

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

In the ongoing digital wave, central bankers and regulators, particularly in China, are also starting to embrace issuing their own digital currencies for everyday use, in a major break from global finance’s conventional workings.

Beijing will issue 10 million yuan ($1.55 million) worth of digital currency to residents that can be used during the Lunar New Year holiday starting on Thursday, domestic 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 will help banks in their role of enabling credit creation.

Bitcoin Prices

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

The Tesla news-led rally stretched beyond bitcoin. Shares of companies that provide trading platforms for bitcoin and the technology to “mine” the cryptocurrency surged in China, South Korea, Australia, and big computer-chip making companies such as SK Hynix also rose.

Even Dogecoin, a joke cryptocurrency with a dog as its symbol, has seen its value turbocharged after Musk mentioned it on Twitter. It has jumped by 13% in the past day, according to CoinMarketCap.

“It’s really become popular culture and mainstream,” Chu said. “People are no longer asking why I should invest in bitcoin. They have to defend why they’re not.”

bitcoin

Photo Credit: Reuters

(Additional reporting by Saikat Chatterjee; editing by Jacqueline Wong, Larry King)

Related Articles

How to Relax With CBD

Real Time Pain Relief Products on Amazon

Don't miss out on the latest news and information.
TAGS: Bitcoin, crypto, Tesla
For feedback, complaints, or inquiries, contact us.
Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.




We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.