In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin can be seen in front of the Bitcoin price chart on February 9, 2021 in Paris, France.
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Bitcoin’s price broke above $ 50,000 for the first time in history on Tuesday and continued its blistering rally as major companies seem to warm up to cryptocurrencies.
According to data from Coin Metrics, the world’s largest digital currency rose by more than 3% by market value to a record high of $ 50,487 at around 7:30 a.m.ET.
Bitcoin has received a boost from news from major companies such as Tesla, Mastercard and BNY Mellon showing support for crypto. Tesla revealed last week that it had purchased $ 1.5 billion worth of bitcoin and plans to accept the digital currency as payment for its products, while Mastercard said it would open its network to some digital currencies. PayPal and BNY Mellon have also taken big steps to support crypto.
Tesla’s use of corporate cash to buy bitcoin sparked speculation as to whether other large companies would follow suit. Uber CEO Dara Khosrowshahi told CNBC last week that the company discussed the idea to buy bitcoin but “quickly rejected it.” However, the company is considering accepting cryptocurrencies as payment.
These developments have led many crypto investors to believe that the latest bull run is different from previous rallies. Bitcoin soared to nearly $ 20,000 in late 2017, before losing more than 80% of its value the following year. Bitcoin believers say that while the 2017 bubble was driven by retail speculation, the current cycle is fueled by institutional investor demand.
“I think bitcoin is a much more stable asset class today than it was three years ago,” Michael Saylor, CEO of enterprise software company MicroStrategy, told CNBC’s “Street Signs Asia” program on Tuesday. “It used to be dominated by leveraged retailers … in highly leveraged international markets.”
MicroStrategy and Jack Dorsey’s fintech company Square made headlines last year after pursuing the unusual strategy of using corporate cash to buy bitcoin.
“I think you saw institutions coming from March 2020 and I think you will see that trend continue into 2021,” said Saylor. “There are enthusiasts about bitcoin as a medium of exchange … but personally I believe the compelling use case is a store of value.”
MicroStrategy has increased its stock price more than sevenfold since it first bought bitcoin in August. The company announced on Tuesday that it would offer $ 600 million in convertible bonds to buy more bitcoin. It has been speculated that MicroStrategy has offered a blueprint for Tesla’s bitcoin purchase following an exchange between Saylor and Elon Musk on Twitter about making “big transactions” with the cryptocurrency.
Still, skeptics see bitcoin as a speculative asset and worry that it might just be one of the biggest market bubbles in history. Economists like Nouriel Roubini say bitcoin and other cryptocurrencies have no intrinsic value. And a recent study from Deutsche Bank said investors consider bitcoin to be the most extreme bubble in financial markets.