Driven by the positive sentiments among investors of continued greater acceptance amongst mainstream investors of the biggest crypto currency of the world bitcoin, the value of the digital currency surged past $50,000 mark for the first time in its history.
A new high of $50,602 was reached by bitcoin and was ended with a rise of 3.3 per cent at $49,537. So far this year, the value of the crypto currency has risen by about 72 per cent with the largest part of its gains being made after the announcement by the United States based electric car maker Tesla of having bought bitcoin worth $1.5 billion while also saying that it would also be accepting the crypto currency as a mode of payment from customers for its cars.
Tesla was but only one of the many large investments that have pushed bitcoin from the fringes of the global finance world very close to the mainstream to company balance sheets and Wall Street dealing desks. At the same time, bitcoin is being bought by firms and traditional money managers in the US.
“The recent market conditions and events both in the crypto space and the financial world at large put such a price movement within the realm of possibility,” said Jacob Skaaning of crypto hedge fund ARK36.
“However, I’d like to offer a word of caution: while my long-term outlook is bullish, massive price fluctuations along the way are only to be expected. Bitcoin is still extremely volatile.”
The crypto currency had seen an astounding 300 per cent rise in 2020 – the year of the Covid-19 pandemic, with investors looking out for alternatives to the dollar as the US Federal Reserve brought down interest rates to zero per cent. That was followed by the rush of retail and institutional investors towards bitcoin in 2021. In comparison, just five year ago, the value of bitcoin was a few hundred dollars.
Analysts are predicting further gains for the crypto currency because of the limited supply of bitcoin even while the narrative of the digital currency becoming the digital gold is becoming more predominant.
“If that narrative comes to fruition, then the growth potential is off the charts as $50,000 per bitcoin equates to a market cap of roughly $931 billion, which is almost 9% of gold,” said John Wu, president at blockchain company Ava Labs. “If BTC meets gold’s market cap, then that would be at least $500,000 per bitcoin.”
If bitcoin becomes established as a safe-haven asset, the value of the crypto currency could get as high as $146,000, JPMorgan said in January, while noting that it was slowly emerging as a rival to gold. Such a growth would be a new dawn for the digital currency following years of lying on the side lines and only being a play tool for speculators and retail punters.
With investors increasingly acquiring and deciding to “hodl” bitcoin asset for the long term, the crypto currency’s liquid supply is continuing to decrease. “Hodl” is crypto slang for the act of an investor holding the asset instead of selling it.
(Adapted from Reuters.com)