Bitcoin blew through another milestone, surging past US$50 000 for the first time as the blistering rally in the largest cryptocurrency continues to captivate investors worldwide.
The world’s largest cryptocurrency reached about $50 191 as of 2.32pm South African time and is now up about 73% so far this year. Ether, a rival crypto, hit a record on Friday and is up about 140% year to date.
After ending last year with a fourth quarter surge of 170% to around $29 000, bitcoin jumped to $40 000 seven days later. It took just six weeks to breach the latest threshold, buoyed by endorsements from the likes of Paul Tudor Jones, Stan Druckenmiller and Elon Musk. Bitcoin traded for a few cents for several years after its debut more than a decade ago.
Tesla’s announcement that it added $1.5-billion in bitcoin to its balance sheet was the most visible recent catalyst, sending the price up 16% on 8 February, the biggest one-day gain since the Covid-19-inspired financial markets volatility in March. Optimism grew after Mastercard and Bank of New York Mellon moved to make it easier for customers to use cryptocurrencies, while Bloomberg News reported on Saturday that Morgan Stanley may add bitcoin to its list of possible bets.
“Whether it’s Musk, Mastercard or Morgan Stanley, the mood, music and momentum is impossible to ignore,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, one of the biggest crypto lenders. “To the annoyance of many, the bitcoin express has left the station.”
The 400% rally over the past year comes amid a backdrop of near-zero borrowing rates from central banks and unprecedented stimulus from governments in the wake of the coronavirus pandemic. Bitcoin advocates have criticised the moves as money printing even though inflation remains subdued.
Mastercard, in a blog post last week, singled out so-called “stablecoins”, which often peg their value to that of another asset, such as the US dollar. Mastercard has already partnered with crypto card providers such as Wirex and BitPay, but has required digital currencies to be converted into fiat before processing payments for transactions on its network.
Trenchev cautioned that investors should be prepared for a wild ride after the latest milestone, pointing to last month’s 30% pullback as evidence. “Short-term volatility is very much a feature of this bull market and investors should prepare accordingly,” he said. — Reported by Olivia Raimonde, (c) 2021 Bloomberg LP