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LONDON: Bitcoin rose above $50,000 for the first time, adding steam to a rally fuelled by signs that the world’s biggest cryptocurrency is gaining acceptance among mainstream investors and companies.
Bitcoin hit a record $50,603 on Tuesday 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.
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 to company balance sheets and US firms and traditional money managers starting to buy the coin.
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.
The 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.
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.
US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde have both called for tighter oversight of bitcoin. Also boosting bitcoin are suggestions that its limited supply of 21 million could drive further gains for the virtual asset.
A narrative of bitcoin becoming “digital gold” has gained traction as investors predict looming inflation amid massive central bank and government stimulus to counter COVID-19.
St. Louis US Federal Reserve President James Bullard said that bitcoin’s claim to be a gold rival would not threaten greenback dominance. “Investors want a safe haven, they want a stable store value and then they want to conduct their investments in that currency,” he said. “It’s very hard to get a private currency – it’s really more like gold – to play that role.”
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. Meanwhile, smaller cryptocurrency ethereum fell 2.42%, after earlier rising to $1,826, just shy of its record high price of $1,875. With cryptocurrencies collectively worth about $1.5 trillion, some investors caution about the value of owning them.
