LONDON (Reuters) – Bitcoin rose above $50,000 on Tuesday for the first time, adding steam to a rally fuelled by signs that the world\u2019s biggest cryptocurrency is gaining acceptance among mainstream investors and companies.<\/p>\n
Bitcoin hit a record $50,603 and was last up 0.83% at $48,351. It has risen around 67% so far this year, with most of the gains coming after electric carmaker Tesla said it had bought $1.5 billion in bitcoin.<\/p>\n
The move by Tesla, which also said it would accept bitcoin as payment, was the latest in a string of large investments that have vaulted bitcoin from the fringes of finance to company balance sheets and Wall Street, with U.S. firms and traditional money managers starting to buy the coin.<\/p>\n
\u201cThe rally in bitcoin in part reflects the recent buoyancy of market confidence but also headlines suggesting an increase in corporate acceptability,\u201d said Jane Foley, head of FX Strategy at Rabobank.<\/p>\n
Evolve Funds Group said on Tuesday it had applied to launch a Bitcoin exchange-traded fund on the Toronto Stock Exchange. That would be the second planned bitcoin ETF after Canada\u2019s main securities regulator approved a fund by Purpose Investments Inc.<\/p>\n
Such mainstream moves could help bitcoin become a widespread means of payment – having so far failed to achieve large scale adoption – and in turn bolster prices.<\/p>\n
\u201cThe more people that adopt it and use it as money, then the greater the chances of it perhaps being taken on board as a mainstream currency,\u201d said Russ Mould, investment director of AJ Bell. \u201cThat would feed further speculative interest.\u201d<\/p>\n
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The rush in 2021 by retail and institutional investors comes on top of a 300% rise last year as investors searched for high-yielding assets and dollar alternatives amid rock-bottom or even negative interest rates globally.<\/p>\n
The meteoric rise of bitcoin, which traded at a few hundred dollars only five years earlier, has also led major investment banks to warn of a speculative bubble.<\/p>\n
Bitcoin\u2019s rise \u201cblows the doors off prior bubbles,\u201d BofA said last month.<\/p>\n
Despite the mainstream interest, cryptocurrencies remain subject to patchy oversight globally, with the lack of regulatory clarity and associations with crime keeping many larger investors leery of exposure.<\/p>\n
U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have both called for tighter oversight of bitcoin.<\/p>\n
Some believe extreme volatility is a cause for concern.<\/p> \u201cDue to its volatility, bitcoin lacks many of the established qualities that make up \u2018money\u2019, such as being a stable store of value and unit of account,\u201d said George Lagarias, chief economist at Mazars.<\/p>\n Graphic: Bitcoin crosses $50K –<\/p>\n Also boosting bitcoin are suggestions that its limited supply of 21 million could drive further gains for the virtual asset.<\/p>\n A narrative of bitcoin becoming \u201cdigital gold\u201d has gained traction as investors predict looming inflation amid massive central bank and government stimulus to counter COVID-19.<\/p>\n St. Louis U.S. Federal Reserve President James Bullard told CNBC on Tuesday that bitcoin\u2019s claim to be a gold rival would not threaten greenback dominance.<\/p>\n \u201cInvestors want a safe haven, they want a stable store value and then they want to conduct their investments in that currency,\u201d he said. \u201cIt\u2019s very hard to get a private currency – it\u2019s really more like gold – to play that role.\u201d<\/p>\n JPMorgan said in January that bitcoin emerged as a rival to gold and could trade as high as $146,000 if it becomes an established safe-haven.<\/p>\n U.S. business intelligence software firm MicroStrategy Inc, whose CEO is a strong bitcoin proponent, on Tuesday said it would issue $600 million in convertible notes to buy additional bitcoin.<\/p>\n Meanwhile, smaller cryptocurrency ethereum fell 2.42%, after earlier rising to $1,826, just shy of its record high price of $1,875.<\/p>\n With cryptocurrencies collectively worth about $1.5 trillion, some investors caution about the value of owning them.<\/p>\n \u201cAs an intangible asset with no yield or practical use, save for a few organisations who accept it as payment, it is really just demand (against a predictable supply) which determines its price,\u201d said Mazars\u2019 Lagarias.<\/p>\n \u201cBut whereas the price of bitcoin has risen to the skies, what value one gets from holding it in a long-term portfolio still remains subject of much debate.\u201d<\/p>\nDIGITAL GOLD?<\/h2>\n