Bitcoin prices have hit a new record after carmaker Tesla, owned by billionaire Elon Musk, revealed it bought $1.5 billion of the cryptocurrency in January.
The news pushed Bitcoin’s value to $48,190 (£34,995), eclipsing previous records by over $10,000. Prices have since dipped to around $47,000.
Further buoying prices was the news that Tesla is expected to start accepting Bitcoin as payment in the future.
The news was revealed in a stock market filing that said the company had updated its investment policy to include “reserve assets” like digital currencies, along with gold bullion 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,” the filing said.
At current prices, a single bitcoin would be able to buy a Tesla Model 3, which retails for $37,990. As such, the company will need to work out how to price its vehicles to account for the extreme fluctuations in value that Bitcoin is prone to, along with how to process and store payments.
DIGIT’S 2021 #virtualevents calendar:
📅 #MarTech Summit https://t.co/JkViHnOzbF Wed 24 Feb
📅 ScotSecure #CyberSecurity Summit https://t.co/JaD886wGh9 24/ 25 Mar
📅 #DigitalEnergy Summit https://t.co/thGSfrBqlM 22 Apr
📅 DIGIT #Leader Summit https://t.co/alC1xjRvtW 26 May pic.twitter.com/XXGqh5Braw
— DIGIT (@digitfyi) January 18, 2021
Bitcoin started this year with a bang, as its price surged at the end of last year to reach a new record. After its value shot up in 2017, peaking at around $18,600 in December before falling again. In early January 2021, its value had risen to $34,000 before a flash crash brought it down to £29,000, and eventually its value dipped down to around $22,500 in late January.
While the Bitcoin rollercoaster ride shows no signs of levelling out, there are still questions about its legitimacy as a viable currency. The coin has been moving into the mainstream since its initial 2017 peak, which was driven by individual investors betting on an increase in the cryptocurrency’s value. The subsequent 2021 peak was created as major investors, such as hedge funds, started pouring their money into the asset.
The Musk factor has played a large role in pushing up prices – Bitcoin’s value rose after Musk simply added #bitcoin to his Twitter page. Similar investor bullishness has helped increase Tesla’s share price, and Musk’s wealth, as fans of the tech billionaire invest in the carmaker, which is still a minor player compared to international vehicle manufacturers.
Musk is currently vying with departing Amazon CEO Jeff Bezos for the position of world’s richest person, with his fortunes largely tied to rising Tesla stock prices.
- DIGIT Movers and Shakers | January 2021
- Scottish firms pledge commitment to ‘FinTech For All’ charter
- AAI EmployAbility secures funding to help minority ethnic women get back into the workplace
However, there have been recent moves that have firmed up the use and value of Bitcoin outside the world of finance. PayPal decided to offer cryptocurrency trading last year, and the rise of dedicated cryptocurrency investment services like Edinburgh-based Zumo have helped move Bitcoin into the mainstream.
Commenting on the news, CEO of Zumo Nick Jones said: “Tesla’s investment is further validation of Bitcoin’s place as a premium asset for corporate, institutional and retail investors and we should expect to see more large purchases being announced in the coming months.
“Retail investors have been flooding into Bitcoin since December and ‘Papa Elon’s’ intervention is set to grow this number exponentially, with the announcement of Tesla’s holdings already propelling BTC up over 12% to a new all-time high.”
However, as Bitcoin’s popularity grows, so too the risks of investing in such a historically volatile asset. This drove the Financial Conduct Authority (FCA) in January to warn about the risks of investing in cryptocurrencies.