The digital currency hit a record high of $ 49,714.66 on Sunday before pulling back slightly. Bitcoin is still up about 4% in the last 24 hours.
Investors have pushed the price of bitcoin up during the pandemic as the Federal Reserve cut interest rates to near zero in March 2020 (and expects to hold them there for several more years), severely weakening the US dollar.
That makes bitcoin an attractive currency in relative terms. There is a fixed limit to the number of bitcoins on the planet, and investors believe that once the supply runs out, the value of the digital currency can only increase.
As bitcoin soars to record highs, major name brand investors are hitting it, and huge consumer companies are embracing it, helping in bitcoin’s rising valuation.
Last week, Tesla said it will soon be able to accept the digital currency as payment for its cars. And Tesla,TSLA the most valuable auto company in the stock market, said it keeps some of its cash in bitcoin rather than traditional currency.
On Wednesday, Mastercard announced that it will support “selected cryptocurrencies” directly on its network later this year. That was an important milestone for bitcoin: SquareSQ and PayPalPYPL has recently started allowing customers to trade bitcoin, but Mastercard will be bitcoin’s most mainstream, main platform to date.
That adds a dose of validity and appeals to cryptocurrency for mainstream investors. For example, a top executive at BlackRock said last year that bitcoin could one day replace gold. And Jay Z and Twitter CEO Jack Dorsey announced on Friday that the pair is establishing a bitcoin development fund.
Bitcoin first passed USD 20,000 in December and has more than doubled in value in three months.
Appetite for risk
Still, the cryptocurrency’s recent surge is showing signs of a melt-up – over-enthusiasm fueled by fears of missing out, not just fundamental market conditions. Take Elon Musk’s sarcastic tweets about bitcoin rival Dogecoin in recent months: The digital coin, itself constructed as a cryptocurrency parody, shot up 50% earlier this month after Musk tweeted, but crashed last week.
Anthony Scaramucci, the founder of Skybridge Capital, has a large stake in bitcoin and a fund aimed at high net worth investors: The SkyBridge Bitcoin Fund LP. But even he says people should be wary. He told CNN Business last month that it could be a solid addition to the average investor’s portfolio, but you have to have the courage to do it. After all, bitcoin prices plunged below USD 4,000 shortly after reaching an earlier peak of just under USD 20,000 in December 2017.
“This could be a huge bubble,” Scaramucci told CNN Business in January. “We expect the fund to be volatile and may lose money”,
Scaramucci said bitcoin could suddenly drop 20% to 50%. But he also highlighted bitcoin’s staying power over the past decade: if you took $ 1 and put 99 cents of it in cash and one cent in bitcoin, that investment strategy would have outperformed $ 1 in the last 10 years. in the S&P 500., he wrote.
“The most likely trajectory is that people can make a monumental amount of money. Bitcoin is not hampered by Federal Reserve policies or gold supply issues,” he said. “There is now more demand for bitcoin than supply. The price should rise.”
Paul R. La Monica of CNN Business contributed to this report.
