Tesla investment powers Bitcoin towards $50K

LONDON — Bitcoin was fast approaching the US$50,000 mark on Tuesday as the afterglow of Elon Musk-led Tesla’s investment in the cryptocurrency had investors reckoning it may become a mainstream asset class for both corporations and money managers.

The most popular cryptocurrency has gained 1,150 per cent from March 2020 lows as institutional investors search for alternative wealth stores and retail traders ride the wave. It traded at a few hundred dollars only five years back.

Monday, it leapt 20 per cent after Tesla announced it had a US$1.5-billion investment and that it would eventually take the cryptocurrency as payment for its cars. That was its largest daily rise in more than three years.

The price of one bitcoin climbed to a peak of US$48,216 — almost enough to buy one of the best-selling Tesla vehicles, Tesla Model Y SUV. Rival cryptocurrency ethereum struck a record high of US$1,784.85 on Tuesday.

Musk, a well-known supporter of cryptocurrencies, foresees accepting the currency as a payment for Tesla cars and analysts reckon this is a larger shift as companies and big investment houses follow small traders into the asset.

“Bitcoin is definitely capturing investors’ attention — I get more and more questions about it,” said Marija Vertimane, senior strategist at State Street Global Markets.

“From a practical point of view, using bitcoin to buy anything — Tesla cars — would be still extremely difficult given its excessive volatility.”

Bitcoin’s volatility has been a hindrance for some serious investors and a sticking point in using it for transactions. Realized volatility, or daily price swings measured in terms of closing prices for Bitcoin over the past 90 days was at 72 per cent, compared with 16 per cent for the S&P 500 stocks index and six per cent for the euro currency.