Bitcoin extends record streak in Asia trading; Ethereum hits peak

Crypto fan Musk breaks with other industry leaders in backing the coin that’s still regarded with suspicion by many; expected to boost acceptance of virtual currency

by Sean OMeara
Bitcoin surges to record on $1.5bn Tesla purchase 
Photo: Reuters

(ATF) Cryptocurrencies continued to their record setting spree after Tesla's $1.5 billion of Bitcoin and following its announcement it may accept it as payment for cars and other products.

Bitcoin rose as much as 2.5% to hit a record high of $47,565.86 in Asian trading hours on Tuesday, taking its year to date gain to 61%. Ethereum hit a record of $1,784.

Analysts said the move by one of the world's best-known companies was liable to prove a game changer for bitcoin.

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“This is probably one of the biggest developments for the crypto currency industry,” said Fawad Razaqzada, market analyst at TF Global Markets in the UK. “Tesla is going to be a major player in the auto industry and if it starts accepting bitcoin as a form of payment, it will give the digital currency further legitimacy.” 

Few large companies have made such a commitment to a cryptocurrency on account of the wild swings in its value and suspicions about its legitimacy.

However, Tesla CEO Elon Musk is A well-known supporter of bitcoin and has been weighing in regularly over the past week to a frenzy in retail investment, also driving up shares in meme-based digital currency dogecoin and shares of US video game chain GameStop.

Increase demand

Musk said a week ago that bitcoin was "on the verge" of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency.

“As more and more companies start accepting bitcoin, this will only lead to further increases in demand in a market which is limited in supply,” Razaqzada added.

"One of the largest companies in the world now owns Bitcoin and by extension, every investor that owns Tesla (or even just an S&P 500 fund) has exposure to it as well,” said Eric Turner, vice president of market intelligence at cryptocurrency research and data firm Messari.

Bitcoin, which has set new record highs in recent months after a rollercoaster ride over the past decade, has also drawn support from major financial institutions this year. The world's biggest money manager Blackrock recently changed a handful of investment mandates to allow some of its funds to invest in the currency.

Central banks remain sceptical of digital currencies, but analysts say the more real world uses appear for bitcoin, the more attractive it will prove as a long-term store of value.

Investment policy

Tesla said in a filing the decision was part of its broad investment policy as a company and was aimed at diversifying and maximizing its returns on cash.

It said it had invested an aggregate $1.5 billion in bitcoin under the changed policy and could "acquire and hold digital assets from time to time or long-term".

"He's now putting his money (shareholders') where his mouth is," Markets.com analyst Neil Wilson said.

"But given his recent comments – and adding #Bitcoin to his Twitter bio on January 29 – it also raises a real question about possible market manipulation."

Musk has also endorsed other crypto currencies in the recent past. He gave dogecoin, the coin based on a popular internet meme, a shoutout on Twitter last week sending its price to record highs over the weekend.

Late on Sunday, in a fresh endorsement for the cypto currency, Musk tweeted "Who let the Doge Out" -- mimicking lines from the famous song by Baha Men from 2000.

The coin has also received attention from California rapper Snoop Dogg by putting up an image of a dog tagged "Snoop Doge" on his Twitter timeline.

Dogecoin was created largely as a satirical critique of the 2013 crypto frenzy and is not taken as seriously as bitcoin or ethereum. It almost doubled since Friday hitting a record $0.0871, according to data on blockchain and cryptocurrency website Coindesk.

  • Reporting by Reuters