New York/London: Bitcoin hurtled towards the $50,000 mark after Elon Musk-led Tesla’s investment in the cryptocurrency on Monday.
The cryptocurrency has gained 1,000% since its March 2020 lows as investors tapped alternative investments and retail traders joined in.
Glassnode, which offers insight on blockchain data, said in a recent report that bitcoin’s limited supply indicates the virtual asset will gain further.
The ‘hodl’ phenomenon
Bitcoin’s supply is continuing to decrease as investors buy and “hodl” the asset for the long term.
“Hodl” is crypto slang for an investor holding the asset instead of selling it.
78% of issued bitcoin are either lost or are being “hodled”, leaving under 4 million bitcoins to be shared among new market entrants such as PayPal, S&P 500 firms and exchange traded funds, Glassnode said.
Tesla for Bitcoin
Bitcoin soared 20% on Monday after Tesla said it had a $1.5 billion investment and would take the cryptocurrency as payment for its cars.
Bitcoin climbed to $48,216.09—enough to buy one of the best-selling Tesla models, the Tesla Model Y SUV.
Ethereum basks in reflected glory
Rival cryptocurrency ethereum struck a record high of $1,825.36 on Tuesday.
Musk’s recognition of the currency as payment for Tesla cars may mark a shift as firms and investment houses look to enter the virtual asset.
However, its volatility has been a key concern for serious investors and a hurdle for transacting with it.
Bitcoin volatility
Pointing to how volatility affects a Tesla purchase, an analyst said that if Bitcoin’s value crashes, the buyer may end up winning a Tesla car in a lottery.
If the cryptocurrency’s price soars at the current pace, people may find Tesla too expensive.
Bitcoin rally
Bitcoin is up 67% this year following a 300% rally last year as investors look for alternatives to the dollar because of the US Federal’s 0% interest rates. The dollar fell against most currencies on Tuesday.
Amid the digital wave, central banks and regulators are starting to embrace issuing their own digital currencies for everyday use.
Chinese digital currency
China is issuing 10 million yuan ($1.55 million) worth of digital currency for use during the Lunar New Year holiday starting Thursday, local media said.
Bitcoin shares
The Tesla news-led rally has expanded beyond bitcoin. Shares of firms that provide trading platforms for bitcoin and the tech to “mine” the cryptocurrency soared across China, South Korea, and Australia.
MicroStrategy Inc., a business intelligence software company and a bitcoin buyer, climbed 215% this year, after posting gains of 172% in 2020.
Dogecoin turbocharged
Even dogecoin, a cryptocurrency with a dog as its mascot, has seen its value surge after Musk mentioned it on Twitter. Dogecoin has jumped 13% in one day, CoinMarketCap said.