- The bitcoin price continued to break records, touching $48,000 before slipping back slightly.
- Elon Musk’s Tesla said it had bought $1.5 billion of bitcoin, fuelling a cryptocurrency rally.
- Michael Novogratz said other companies would follow suit, although some analysts were skeptical.
The bitcoin price jumped to an all-time high of above $48,000 on Tuesday, after Elon Musk’s Tesla said it had bought up $1.5 billion of the world’s biggest cryptocurrency.
Bitcoin then slipped back slightly, but was up 15.7% to $45,694 as of 6am ET. One major backer said he saw the price rising to $100,000 by the end of the year.
Musk’s electric car company Tesla caused a stampede into the digital currency on Monday, when it revealed it had bought up $1.5 billion of bitcoin in January. Tesla also said it planned to start accepting bitcoin as payment.
The rally continued on Tuesday morning, meaning bitcoin had risen by roughly 1,000% since its March 2020 low of around $4,000.
Michael Novogratz told Bloomberg TV on Monday that he thought bitcoin would more than double to $100,000 by the end of 2021, as big-name firms get behind the currency.
“You’re going to see every company in America do the same thing [as Tesla],” Novogratz, the founder of crypto investment firm Galaxy Digital, told Bloomberg.
“One of the things that connect bitcoin and Tesla and solar stocks and ESG investing is millennials and gen Z. Young people are buying into the future, and they see cryptocurrencies – bitcoin and other cryptos – as their currencies,” he said.
Bitcoin rival ether, the native cryptocurrency of the Ethereum network, also rose sharply on Monday and Tuesday to record highs as the Tesla-driven rally spread to other cryptocurrencies.
The ether price was up 4.8% to $1,738 early Tuesday morning, having earlier touched a record of above $1,800.
It was also supported by CME Group – one of the world’s biggest exchanges – launching trading in ether futures on Monday. Futures are contracts that let investors buy or sell an asset at a specified price and date in the future.
Analysts said the move by Musk and Tesla would reassure retail investors about holding bitcoin and other cryptocurrencies.
Derek Halpenny, head of global markets research at MUFG in Europe, said: “Any steps taken that has the potential to improve credibility and lift bitcoin as a more viable means of exchange is going to be positive.”
However, Jerry Klein, managing director at Treasury Partners, said Tesla’s purchase was “an unusual use of corporate cash.”
“It remains to be seen how shareholders would react if a decline in bitcoin’s price negatively affects Tesla’s future earnings.”
Many analysts said a falling dollar would support bitcoin further, with some investors seeing the cryptocurrency as a hedge against a drop in the value of traditional currencies.
The dollar index was down 0.41% to 90.56 on Tuesday after a strong run. Investors broadly think record amounts of stimulus and low interest rates will weigh on the greenback in 2021.