The digital currency hit a record high of $ 49,714.66 on Sunday, before backing down a bit. Bitcoin is still up about 4% in the past 24 hours.
Investors sent the price of bitcoin soaring during the pandemic, when the Federal Reserve cut interest rates to almost zero in March 2020 (and hopes to keep them there for several years), severely weakening the U.S. dollar.
This makes bitcoin, by comparison, an attractive currency. There is a definite limit to the number of bitcoins on the planet, and investors believe that when the stock runs out, the value of the digital currency can only increase.
As bitcoin reaches historic levels, major brand investors are accumulating it and major consumer companies are embracing it, helping to increase bitcoin’s appreciation.
Last week, Tesla said it could soon accept digital currency as payment for its cars. AND Tesla, (TSLA) the most valuable car maker on the stock market, said it is keeping part of its money in bitcoin instead of the traditional currency.
On Wednesday, Mastercard announced that it will support “selected cryptocurrencies” directly on its network sometime this year. This represented an important milestone for bitcoin: Square (SQ) and PayPal (PYPL) recently started to allow customers to trade bitcoin, but Mastercard will be the most popular and important bitcoin platform so far.
This is adding a dose of validity and appeal to cryptocurrency to mainstream investors. For example, a senior executive at BlackRock said last year that bitcoin could one day replace gold. And Jay Z and Twitter CEO Jack Dorsey announced on Friday that the pair is establishing a bitcoin development fund.
Bitcoin exceeded $ 20,000 for the first time in December and more than doubled in value in three months.
Risk appetite
Still, the recent rise in cryptocurrency is showing signs of melting – excess enthusiasm fueled by fear of losing, not just the fundamentals of the market. See Elon Musk’s sarcastic tweets about bitcoin rival Dogecoin in recent months: the digital currency, which was built as a cryptocurrency parody, shot up 50% earlier this month after Musk tweeted, only to break last week.
Anthony Scaramucci, founder of Skybridge Capital, has a large stake in bitcoin and a fund aimed at wealthy investors: the SkyBridge Bitcoin Fund LP. But even he says that people need to be aware. He told CNN Business last month that it could be a solid addition to the average investor’s portfolio – but you have to have the stomach for that. After all, bitcoin prices plummeted below $ 4,000 just after reaching the previous peak of just under $ 20,000 in December 2017.
“This could be a bubble burst,” Scaramucci told CNN Business in January. “We hope the fund is volatile and could lose money”,
Scaramucci said bitcoin could drop suddenly by 20% to 50%. But he also highlighted the staying power of bitcoin over the past decade: if you took $ 1 and put 99 cents in cash and a penny in bitcoin, that investment strategy would have exceeded $ 1 invested in the S&P 500 over the past 10 years, he noticed.
“The most likely trajectory is that people can earn a monumental amount of money. Bitcoin is not restricted by Federal Reserve policy or gold supply issues,” he said. “There is more demand for bitcoin now than supply. The price is expected to rise.”
Paul R. La Monica of CNN Business contributed to this report.
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