Bitcoin surpasses $50,000 for first time ever as major companies jump into crypto

Bitcoin surpasses $50,000 for first time ever as major companies jump into crypto

Bitcoin hit a record high of more than $50,000 on Tuesday, continuing its blistering rally as major companies appear to be warming to cryptocurrencies.

The world’s largest digital currency by market valuable rose more than 3 percent to an all-time high of $50,389 just after 7:30 a.m. ET, according to data from Coin Metrics.

Bitcoin has had a boost from news of large firms like Tesla, Mastercard and BNY Mellon warming to cryptocurrencies. Tesla last revealed it had bought $1.5 billion worth of bitcoin and plans to accept the digital coin as payment for its products, while Mastercard said it would open up its network to some digital currencies. PayPal and BNY Mellon have also made big moves to support crypto.

Tesla’s use of corporate cash to buy bitcoin sparked speculation over whether other major companies would follow suit. Uber CEO Dara Khosrowshahi last week told CNBC that the company had discussed but “quickly dismissed” the idea of buying bitcoin. The firm is however considering whether to accept cryptocurrencies as payment.

These developments have led some crypto investors to believe the latest bull run is different to rallies past. Bitcoin skyrocketed to nearly $20,000 in late 2017 before losing more than 80 percent of its value the following year. Bitcoin believers say that, whereas the 2017 bubble was driven by retail speculation, the current cycle is being fueled by demand from institutional investors.

“I think bitcoin is a much more stable asset class today than it was three years ago,” Michael Saylor, CEO of enterprise software firm MicroStrategy, told CNBC’s “Street Signs Asia” program on Tuesday. “It used to be dominated by leveraged retail traders … on international markets with a lot of leverage.”

MicroStrategy and Jack Dorsey’s fintech firm Square hit the headlines last year after taking the unusual strategy of using corporate cash to purchase bitcoin.

“I think that starting in March of 2020, you saw institutions start to arrive and I think in 2021 you’re gonna see that trend continue,” Saylor added. “There’re enthusiasts for bitcoin as a medium of exchange … but I personally believe that the compelling use case is a store of value.”

MicroStrategy has seen its share price climb more than sevenfold since it first bought bitcoin in August. The company announced Tuesday that it would offer $600 million in convertible bonds to buy more bitcoin. There has been speculation that MicroStrategy offered a blueprint for Tesla’s bitcoin purchase after an exchange between Saylor and Elon Musk on Twitter about making “large transactions” with the cryptocurrency.

Still, skeptics see bitcoin as a speculative asset and worry it may be one of the biggest market bubbles in history. Some economists and investors say bitcoin and other cryptocurrencies have no intrinsic value, while others view bitcoin as the most extreme bubble in financial markets.

Bitcoin Tops $50K and Crypto’s Nouveau Riche Move In

Price Point

Bitcoin (BTC) shot past $50,000 for the first time Tuesday to a new all-time high price.

The gain took the year-to-date return to about 70%, and traders immediately began to discuss what comes next.

“We’re still in the midst of a violent bull run that will soon be more violent,” Ari Paul, chief investment officer of BlockTower Capital, tweeted Sunday.

“We’re concerned about the pace of these market moves and would therefore recommend proceeding with caution over the short term,” Joel Kruger, cryptocurrency strategist at LMAX Digital, said in an email. NOTE: A price correction on Monday led to more than $520 million of futures-positions liquidations.

Bank of America, in a monthly investor survey of the “most crowded trades,” said that “long bitcoin” – bets on further price gains – slipped to second place behind “long tech.” Bets against the U.S. dollar (“short dollar”) ranked third.

In traditional markets, U.S. stock futures pointed toward a higher open. “The reflation trade is powering assets tied to economic growth and price pressure, including commodities and cyclical stocks,” Bloomberg News reported. “At the same time, investors are riding a wave of speculative euphoria from penny stocks to bitcoin amid abundant policy support.”

The News

CRYPTO CRUSH: Signs continued to mount of greater mainstream acceptance of bitcoin and other cryptocurrencies.

Michael Saylor’s MicroStrategy plans a new sale of $600 million of convertible notes and will use the net proceeds to buy more bitcoin.

plans a new sale of $600 million of convertible notes and will use the net proceeds to buy more bitcoin. Deutsche Bank , Germany’s biggest lender, is exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class, CoinDesk’s Ian Allison reported Friday.

, Germany’s biggest lender, is exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class, CoinDesk’s Ian Allison reported Friday. Morgan Stanley’s $150 billion Counterpoint Global investment unit is considering placing a bet on bitcoin, according to a report by Bloomberg, which cited people familiar with the matter.

$150 billion Counterpoint Global investment unit is considering placing a bet on bitcoin, according to a report by Bloomberg, which cited people familiar with the matter. The city of Miami, following the lead of Mayor Francis Suarez, voted late last week to study the use of cryptocurrencies to pay for services or worker salaries while launching educational campaigns in English, Spanish and Creole.

VERGE SNAFU: Verge, a small cryptocurrency serving as a payments option on Pornhub, suffered a massive 560,000-block reorganization Monday, according to researchers at Coin Metrics.

The past 200 days of Verge transaction history “just vanished,” wrote Coin Metrics network data analyst Lucas Nuzzi. He described the event as “likely the deepest reorg that has ever taken place in a ‘top 100’ cryptocurrency.”

Verge’s official Twitter account said the “dev team has released a fix,” and everything should be “business as usual” in “13 hours,” CoinDesk’s Zack Voell reported.

The cryptocurrency previously known as DogecoinDark is no stranger to network attacks. It suffered similar but less severe exploits in April 2018 and May 2018.

Market Moves

Nouveau riche emerge as crypto market cap tops $1.5 trillion

This ranking of the top 10 cryptocurrencies by market value shows how the leaders from prior years, like XRP and litecoin, have been elbowed out recently by fast-growing blockchain projects like Cardano and Polkadot. Source: Messari

The market value of all cryptocurrencies has topped $1.5 trillion for the first time, and it’s interesting to note just how much of that growth has been fueled by speculation over which projects might be the most promising, rather than just the pumping of also-ran tokens that dominated the industry’s top ranks in recent years.

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Sure, the industry leaders bitcoin and Etherum’s ether still dominate the charts, representing roughly $1.1 trillion of the total. But the top 10 tokens now include cardano (ADA), polkadot (DOT), Binance coin (BNB) and chainlink (LINK) – all associated with projects perceived as having at least some claim on helping to create the future of finance.

They’re crypto’s nouveau riche, climbing in the industry hierarchy at the expense of XRP (XRP), litecoin (LTC) and bitcoin cash (BCH), which held sway until recently but apparently have failed to inspire traders to the same degree.

Some companies in the growing arena of decentralized finance (DeFi), a subsector of the crypto industry where entrepreneurs are using blockchain technology to design automated versions of lenders and trading platforms, are raising money through token sales the way a Silicon Valley startup might sell an equity interest to a venture-capital fund.

In fact, Synthetix, a decentralized trading project, has just raised $12 million from investors Coinbase Ventures, Paradigm and IOSG – apparently through a sale of the project’s associated SNX tokens. “The raise looks to be a rare occurrence of VCs investing through the purchase of a platform’s native token directly from its treasury rather than wiring funds to its founders,” CoinDesk’s Daniel Kuhn wrote Sunday. The SNX tokens have tripled in price this year to a market value of about $2.9 billion.

“Individually, none of these may make sense, and no one can really predict who actually will win,” John Wu, president of Ava Labs, said in an interview. His company backs the Avalanche blockchain, whose native AVAX cryptocurrency is up roughly 10-fold this year to a market value of $3 billion. And that’s after the revelation of a programming bug last week triggered a quick price correction.

“This is very similar to tech investing where people are paying for the future,” Wu said.

Token Watch

Ether (ETH):

Staked ether in “2.0” deposit contract tops $5.5 billion.

Price hit new all-time high of $1,872.52 on Feb. 12.

Simon Peters, cryptoasset analyst for the trading platform eToro, wrote in an email: “Supply is constrained by investors depositing coins off the network, and buying from institutional investors continues to climb.”

Denis Vinokourov, head of research for crypto prime broker Bequant: “The amount of bitcoin locked on Ethereum remains on a relentless trend higher (174k as of this morning), underpinning the ‘hunt for yield’ trade, which, combined with the surge higher by BTC resulted in the total value locked on DeFi platforms surging to over $40 billion. However, the well documented double-edged sword of a ‘hyperactive’ Ethereum network with erratic gas fees continues to wreak havoc and cause hour-long delays in transaction validations, yet again squeezing out the smaller market participants. The time for platforms to put more focus on layer-2 solutions is here, and doing so will prove beneficial for the broader ecosystem because it will likely drive many users towards decentralized exchanges.”

Dogecoin (DOGE):

Price has fallen in five of the past eight days to about 5.8 cents.

Slide accelerated after Tesla CEO Elon Musk tweeted on Sunday: “If major dogecoin holders sell most of their coins, it will get my full support. Too much concentration is the only real issue imo.”

One dogecoin address holds 27% of meme token’s supply, according to Decrypt.

Avalanche (AVAX):

An unusually high volume of transactions highlighted a code bug that severely crippled the Avalanche blockchain last week, but funds were never at risk, an engineer Ava Labs, the development company behind the network, wrote in a Medium post on Sunday.

The episode represented an embarrassment for the because the “Ethereum killer” blockchain has touted its ability to handle high throughput.

AVAX tokens have tumbled in price since the incident, though they’re still up 11-fold so far in 2021.

Opinions and Observations

STIMULUS BITCOIN WINNINGS: Americans who bought bitcoin with first $1,200 U.S. government stimulus check are up 639%.

BLOCKCHAIN POWER USAGE BETWEEN ROMANIA’S AND POLAND’S: Bitcoin and six other proof-of-work blockchains use between 55.1 terawatt-hours of electricity per year (roughly the energy footprint of Romania) and 180.1 terawatt-hours (Poland or Thailand), argues Tim Swanson, founder of Post Oak Labs and head of market intelligence at Clearmatics, in paper published Sunday.

MOHAMED EL-ERIAN SEES GROWING “OFFICIAL” RISK: “The private sector is embracing more and more bitcoins as both a form of payment and as away to invest,” the Allianz chief economist told CNN’s Julia Chatterley in an interview. “The official sector is warning more about bitcoin. The real accident here is that the official sector says, enough is enough.”

Crypto trades buzzing despite ban fears

According to WazirX, the largest crypto exchange in India, it took 11 days to hit the billion-dollar mark in trading value in February, when compared with 25-30 days in January. The company expects to hit about 2.5X the $1.84 billion total trading value hit in January this month.

“Crypto is a global phenomenon. The moment a Tesla spends $1.5 billion, your wealth in India has increased. Most of your investments are very local, but in crypto, anyone anywhere in the world can affect your wealth. People in India have been joining based on all of this positive news that’s been coming,” said Nischal Shetty, founder of WazirX.

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“The only time we saw some negativity was on the day the bill was posted on Parliament’s website. That was because of panic selling, which happened for a couple of days. The activities and prices returned to normal in the next two days," he added.

The cryptocurrency industry has been nervous since a draft law banning crypto was listed on the agenda in Parliament late last month. The bill aims to “prohibit all private cryptocurrencies in India" and lay the framework for a digital rupee issued and controlled by the Reserve Bank of India (RBI). While the definition of private cryptocurrencies in the bill isn’t clear, many expect Bitcoin and other such assets to be declared illegal.

View Full Image Sarvesh Kumar Sharma/Mint

CoinDCX, another Indian crypto exchange, said there was no drop in trading volumes in February. “On the contrary, due to recent developments in the international market, we have seen interest continue to rise," said Neeraj Khandelwal, co-founder of CoinDCX. “Irrespective of the government’s decision, investors’ funds will be safe as Bitgo is CoinDCX’s custodian," he added.

On 8 February, electric carmaker Tesla said it invested $1.5 billion in Bitcoin. The company also said it expects to start accepting payments in Bitcoin, which led to a 10% jump in the price of the cryptocurrency. Two days later, global payments firm Mastercard also announced it would start supporting cryptocurrencies on its network from this year. Stakeholders said such developments had a much bigger impact on crypto trading in India than reports of the ban.

Crypto exchanges on 8 February launched a campaign to convince the government to rethink the plan. A platform called Indiawantsbitcoin.org was formed that allows anyone to send emails to their respective members of Parliament (MP), showing support for crypto in India. Industry estimates say trading volumes in India grew sixfold in 2020.

Mint reported on 12 February that the proposed cryptocurrency bill may allow holders of such assets to exit before its anticipated ban, but may put a heavy penalty on its conversion to a legal asset.

The form and manner of declaration and how existing holders of cryptocurrency should dispose it of will be prescribed either in the law or through the rules to be notified later, Mint reported, citing a finance ministry official who spoke on condition of anonymity.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which may be tabled in the ongoing budget session, is intended to “create a facilitative framework for the creation of the official digital currency to be issued by RBI. The bill also seeks to prohibit all private cryptocurrencies. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses," the Lok Sabha secretariat said in a bulletin.

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