In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed in front of the Bitcoin exchange rate chart on 09 February 2021 in Paris, France.
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Bitcoin’s price broke above $ 50,000 for the first time in history on Tuesday, continuing its rapid rise as large companies appear to be warming up cryptocurrencies.
According to data from Coin Metrics, the world’s largest digital currency has risen more than 3% by market value to an all-time high of $ 50,389.
Bitcoin has received a boost from the news of big companies like Tesla, Mastercard and BNY Mellon warming up cryptocurrencies. Tesla last revealed that it had bought $ 1.5 billion worth of bitcoin and plans to accept the digital currency as payment for its products, while Mastercard said it would open up its network to some digital currencies. PayPal and BNY Mellon have also made big moves to support crypto.
The use of corporate cash to buy bitcoin has led Tesla to speculate whether other large companies would follow suit. Uara CEO Dara Khosrowshahi told CNBC last week that the company had discussed the idea of buying bitcoin, but rejected it ‘quickly’. However, the firm is considering accepting cryptocurrencies as payment.
These developments have led some crypto investors to believe that the latest bull run is different from previous rallies. Bitcoin rose to nearly $ 20,000 in late 2017 before losing more than 80% of its value the following year. According to Bitcoin believers, although the 2017 bubble was driven by retail speculation, the current cycle is fueled by demand from institutional investors.
“I think bitcoin is a much more stable asset class today than it was three years ago,” Michael Saylor, CEO of MicroStrategy, operating software, told CNBC’s “Street Signs Asia” program on Tuesday. “It used to be dominated by leveraged traders … in international markets with a lot of leveraged financing.”
MicroStrategy and Jack Dorsey’s fintech firm Square got the news last year after adopting the unusual strategy of using corporate cash to buy bitcoin.
“I think you’ll see institutions start arriving in early March 2020 and I think you’ll see in 2021 that the trend continues,” Saylor added. “There are enthusiasts for bitcoin as a medium of exchange … but I personally believe that the forced use case is a valuable addition.”
MicroStrategy has more than doubled its share price since it first bought bitcoin in August. The company announced on Tuesday that it will offer $ 600 million convertible bonds to buy more bitcoin. It was speculated that MicroStrategy offered a blueprint for Tesla’s bitcoin purchase following an exchange of words between Saylor and Elon Musk on Twitter about making “big deals” with the cryptocurrency.
Yet skeptics view bitcoin as a speculative asset and worry that it could be one of the biggest market bubbles in history. Economists like Nouriel Roubini say that bitcoin and other cryptocurrencies have no intrinsic value. And a recent Deutsche Bank survey said investors consider bitcoin to be the most extreme bubble in financial markets.