In a run of its stunning ascent in early January, bitcoin’s price blew past $45,000, $46,000 and $47,000 in less than an hour this week, which eventually topped $48,000. By early Tuesday, the largest cryptocurrency had found a settlement at about $45,200. This particular surge came after Elon Musk’s electric-vehicle company, Tesla, announced that it had bought $1.5 billion of the cryptocurrency. Bitcoin now has a market capitalization of nearly $890 billion, which would rank it ahead of all but six of the world’s largest publicly trading companies, including No. 7 Tesla at $829 billion.
The Musk effect
As soon as the news of Tesla’s investment in bitcoin came out, it sent shock waves down the digital currency soaring 14% to a record high of $43,500. This marks a 300% increase in the cryptocurrency investment that has moved into the mainstream in the past year.
Tesla disclosed its bitcoin holding in a filing with the US Securities and Exchange Commission in which the company said that it had “updated our investment policy to provide us with more flexibility to further diversify and maximise returns” to allow it to invest cash reserves in “alternative reserve assets including digital assets”.
It added that since the decision was approved by its audit committee it had “invested an aggregate $1.5bn in bitcoin under this policy and may acquire and hold digital assets from time to time or long term”.
Musk and his fascination with cryptocurrencies are not entirely new. He has helped to drive the popularity of cryptocurrencies, including bitcoin and dogecoin, by regularly tweeting that he supports these cryptocurrencies. Soon after the news of his investment came to the forefront,the price of dogecoin also rose soon after the price increased by 50% on 4 February, shortly after he tweeted: “Dogecoin is the people’s crypto.”
Simon Peters, a crypto asset analyst at the investment platform eToro, thinks that bitcoin could possibly hit $50,000 by the end of the week. “If there were any doubts as to the mainstream acceptance of bitcoin, this surely must mark the end of any scepticism,” he said in an interview. “Multiple other brands already accept bitcoin as payment, and we would imagine that, in time, other major companies will follow Tesla’s example.”
Eric Turner, the vice-president of market intelligence at cryptocurrency research firm Messari, said in an interview, “I think we will see an acceleration of companies looking to allocate to bitcoin now that Tesla has made the first move. One of the largest companies in the world now owns bitcoin and, by extension, every investor that owns Tesla, or even just an S&P 500 fund, has exposure to it as well.” However, others have told people to be careful before considering investing their savings in bitcoin.
As we talk of it now, one realises that Bitcoin has not just been a trendsetter, ushering in a wave of cryptocurrencies built on a decentralized peer-to-peer network, it’s become the de facto standard for cryptocurrencies, inspiring an ever-growing legion of followers.