TOKYO — The price of bitcoin breached $50,000, passing a major milestone just over a week after electric car maker Tesla revealed it had purchased $1.5 billion worth of the cryptocurrency.
Bitcoin, the world’s most widely traded cryptocurrency with a market cap of $926.5 billion, hit $50,001.35 late on Tuesday night before later dipping back below the line. The virtual currency has surged over the past 11 months, recovering from a March rout that saw its price drop by 30%. The rebound has been fueled by government stimulus and institutional investors entering the market, as well as the jolt from Tesla, which pushed the price over $48,000 for the first time.
Analysts say bitcoin likely benefited from a pause in equity markets. The U.S. took Monday off for Presidents Day while China was celebrating its weeklong Lunar New Year break, diverting interest and liquidity to cryptocurrencies.
The milestone also comes at the end of a week that delivered several positive developments for the nascent asset class. Mastercard announced it would support cryptocurrencies, joining payment services rivals PayPal, Square, and quieter moves by Visa. Investment banks JP Morgan and Morgan Stanley have said they are considering entering the bitcoin market in response to client demand.
Less concretely, Twitter said it is considering adding bitcoin to its balance sheet, while Uber CEO Dara Khosrowshani said his ride-hailing company will look into accepting bitcoin as payment.
“These bitcoin sound bites have been coming fast and furiously since early 2020, when Paul Tudor Jones first made it socially acceptable to talk about bitcoin publicly,” said Jeff Dorman, chief investment officer of Arca, a digital asset investment firm. Jones, who manages the $10 billion Tudor Investment Corp., announced in May that he was holding 2% of his assets in bitcoin.
The question remains how long the favorable market conditions, which have helped bitcoin act as a type of inflation hedge over the last year, will last. Progress in vaccine rollouts and economic recoveries are expected to lift governments’ foot off the stimulus pedal in the latter half of 2021.
“With inflation on the table, anything that protects you from that loss of purchasing power was a good thing last year,” Dorman told Nikkei Asia.
The bitcoin rally may also slow as institutional investors look to diversify their cryptocurrency portfolios. Ethereum, the second-most traded cryptocurrency, reached an all-time high of $1,560 two weeks ago, but was down 1.4% on Wednesday morning.