There’s news reported that Elon Musk’s car firm Tesla bought about $1.5bn of the cryptocurrency Bitcoin in January. He expects to start accepting cryptocurrency as a payment in the future. According to the BBC, this news then caused the price of Bitcoin to jump 17% to $44,220, breaking a new record.
Tesla said it was trying to maximize the returns on cash that is not being used in the running of the company. Consequently, Mr Musk added “#bitcoin” to his Twitter profile page, which causes the price to drive up. Even though he removed it days later, he continues to talk up Bitcoin and other cryptocurrencies. This includes Dogecoin, which jumped 50% right after Elon Musk’s endorsement.
In January, Tesla said it now wanted to invest in “reserve assets” such as gold bullion, digital currencies or gold exchange-traded funds.
“Moreover, we expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis,” it said.
Game-changer to cryptocurrency market?
According to some analysts, Tesla’s investment could be a game-changer to the cryptocurrency.
“I think we will see an acceleration of companies looking to allocate to Bitcoin now that Tesla has made the first move,” said Eric Turner, vice-president of market intelligence at cryptocurrency research firm Messari.
However, Neil Wilson, chief market analyst for Markets.com, warned the public that Bitcoin was “very volatile”.
No intrinsic value?
Bitcoin has drawn support from major financial institutions this year. One of the examples is the world’s biggest money manager, Blackrock. They recently changed some of their investment mandates to allow the investment of cryptocurrency in its fund.
But central banks remain sceptical of digital currencies.
Bank of England governor Andrew Bailey cautioned over Bitcoin’s uses as a payment method.
“I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value,” he said. “It may have extrinsic value in the sense that people want it.”
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