Bitcoin has hit record highs after Elon Musk's car company announced that it had bought circa $1.5bn (£1.1bn) of the cryptocurrency.
Bitcoin has hit record highs for a second day after Tesla, Elon Musk’s car company, announced that it had bought circa $1.5bn (£1.1bn) of the cryptocurrency.
Bitcoin soars after Tesla investment
Bitcoin soared above $48,000 (£34,820) before dropping again, but it is still about 25% higher than this time last week.
Investors thought Tesla’s move would make Bitcoin a mainstream financial asset. The move was criticised by environmentalists because Tesla is a green car firm yet it has invested in an energy intensive currency. Bitcoin uses more energy than Argentina annually.
“Bitcoin mining” requires an energy-hungry computer hardware and ever-greater amounts of processing power.
An editor at news website Techcrunch, Mike Butcher, tweeted: “Tesla: Sells carbon credits to buy Bitcoin, which requires as much energy (not always Green energy) as a small country to mine.” On Monday, Tesla justified the investment by saying that it wanted to maximise returns on cash lying dormant in the company’s accounts and that it also expects to accept payment for its electric cars in Bitcoin in the future.
In China, South Korea and Australia, shares of companies that provide trading platforms for Bitcoin and the technology to mine the cryptocurrency have surged alongside big computer chip-making firms such as SK Hynix.
The cryptocurrency had already gone up 62% in value this year, building on a 300% growth in 2020, as investors search for alternative assets at a time when interest rates in many countries are at record lows.
Big investment firms have started to take interest in Bitcoin, most notably Blackrock which changed its mandates to allow for investment in the currency. On the other hand, central banks are wary of the cryptocurrency. In October, Bank of England governor Andrew Bailey issued a warning over Bitcoin’s use as a payment method, because it lacked “intrinsic value” unlike cash or gold.
Senior portfolio manager at Dakota Wealth, Robert Pavlik, said: “The average institutional investor is shaking their head. For these folks who are believers in cryptocurrency, [Tesla’s investment] gives them another layer of support that crypto is the future.”