Bitcoin hit a fresh record above $47,000 on Tuesday after Tesla Inc’s announcement of a $1.5 billion investment in the largest cryptocurrency.
The token rose as much as 6.3% to almost $47,493 in Asian trading before paring some of the gains. It was at about $46,455 as of 12:22 p.m. in Hong Kong. Tesla’s disclosure Monday sent the price soaring.
The company also said it would begin accepting the digital token as a form of payment for its electric cars. The developments amounted to the biggest endorsement of the controversial cryptocurrency by a mainstream firm. Elon Musk, Tesla’s chief executive officer and the world’s richest man, has for weeks been commenting about digital coins, buffeting their prices.
“One by one, corporations will add Bitcoin to their balance sheets and it couldn’t get bigger than Tesla,” said Vijay Ayyar, head of Asia Pacific with cryptocurrency exchange Luno in Singapore. “Imagine if 100 companies start putting even 1% into Bitcoin, what that is going to do to demand and supply.”
A rally was also evident in Bitcoin futures, suggesting shorts are throwing in the towel and signaling traders won’t fight the crypto advance. The wider Bloomberg Galaxy Crypto Index jumped to a record. Japanese and South Korean cryptocurrency-exposed stocks rose, tracking US and European peers.
Bitcoin’s ascent to its latest summit came with big swings that continue to stoke controversy about its outlook. Predictions for its possible long-term price range from $400,000 and more to zero. Risks for cryptocurrencies range from tightening rules to concerns about their use in terrorist and criminal financing.
Proponents cite backing from the likes of Musk and signs of interest from long-term investors as evidence of a durable Bitcoin rally. They envisage a role for the token as a hedge for risks such as faster inflation, akin to gold. Skeptics see speculators at work and echoes of the 2017 boom that turned to bust.
“The crypto craze is entirely driven by short-term speculative momentum/mania,” Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte, wrote in emailed comments. “For all the noise I keep hearing about how high Bitcoin may go, the noise around how it will be used in everyday life is deafeningly silent.”
In the wake of Tesla’s investment, Michael Novogratz, founder of crypto investment firm Galaxy Digital, said Bitcoin may reach $100,000 by the end of the year. Michael Saylor, chief executive officer of MicroStrategy Inc, declared Bitcoin the “scarcest asset” in the world.
Bitcoin is designed to have a fixed supply of 21 million coins, underpinned by a digital ledger distributed across computer networks. It has more than quadrupled over the past year. Commentators have cited demand from day traders, wealthy buyers, hedge funds, companies and even interest from usually staid investors like insurers.