Bitcoin's Rally In The Afterglow Of Tesla's Investment: All You Need To Know
Even though bitcoin has witnessed a controversial journey ever since its launch and is still not considered legal by many central banks, Tesla's investment is a big stride towards mainstream acceptance for the cryptocurrency, and it has set its price shooting higher (just shy from $50,000 mark) as investors mull possibilities of other big companies to invest in or hold the cryptocurrency. (Also Read: Bitcoin Powers Towards $50,000 As Elon Musk's Tesla Takes It Mainstream )
Billionaire Elon Musk's company Tesla said in a filing the decision to move nearly eight per cent of its reserves into bitcoin was part of its broad investment policy as a company aimed at diversifying and maximizing its returns on cash, including holding gold. According to Tesla, it has invested an aggregate $1.5 billion in bitcoin under the changed policy and could acquire and hold digital assets from time to time or long-term.
The world's most popular cryptocurrency has more than doubled over two months as institutional investors search for alternative wealth stores and retail traders ride the wave. After Tesla's announcement, bitcoin's giant leap on Monday, February 8, was its largest daily rise in more than three years. Bitcoin has witnessed a broader bull run since October 2020, ever since US-based online payment company Paypal allowed customers to make use of bitcoin on its network. (Also Read: Bitcoin Gains Over 5%, Touched New Record High Of $41,530 As Bull Run Continues )
The news of Tesla investing in bitcoin sparked heavy trading in cryptocurrencies and caused exchanges such as Coinbase, Gemini, and Binance to experience technical issues. Additionally, rival cryptocurrency ethereum too achieved a record high of $1,784.85 in the early trade session today.
The price of one bitcoin climbed to a peak of $48,216, which is almost enough to buy one of the best-selling Tesla vehicles, Tesla Model Y SUV. Bitcoin is already up 62 per cent this year, on top of a 300 per cent rally last year, as investors search for alternatives to the greenback because of the US Federal Reserve's zero per cent interest rates. The US dollar slid against most currencies.
Bitcoin has surged in value over the past year due to rising investor sentiment amid the COVID-19 pandemic. Investors see its as a hedge against inflation and are attracted to its tendency for quick gains. The virtual currency breached its earlier record of $42,000 in January 2021. On January 7, the total market value of all cryptocurrencies surged above $1 trillion for the first time. (Also Read: Cryptocurrency Market Cap Touches $1 Trillion: All You Need To Know )
As a mode of payment, bitcoin is still considered less reliable due to its volatile nature, however, some central banks across the world are considering options to allow the issuance of digital currencies. Analysts believe that the cryptocurrency's history teaches us to expect the unexpected.
Almost quadrupling in value, the virtual currency surged exponentially since entering a four-digit value for the first time in 2013. In 2017, it went from about $1,000 to around $20,000. After crossing the $42,000 mark last month, it touched $48,216 on February 9. Bitcoin was last up 15.93 per cent at $45,719.2 against the US dollar. (Also Read: From $2,000 To $20,000 In 3 Years And Counting: All You Need To Know About Bitcoin's Rally )
Unline physical currency, bitcoin is held in virtual wallets with unique keys. They are traded, created, and distributed through a decentralized ledger system known as a blockchain. New bitcoins are generated through a process called mining where people use huge amounts of computing power to solve complex mathematical equations to earn rewards in the form of new coins. Bitcoin is the equivalent of cash but in electronic form.
Meanwhile, the government is planning to introduce a bill on cryptocurrencies in India as the existing laws are inadequate. The Reserve Bank of India may create a facilitative framework for the creation of an official digital currency. ''We expect the government to come up with favourable regulations that will benefit the investors and the Indian crypto ecosystem,'' said Sumit Gupta, Co-founder & CEO, CoinDCX. (Also Read: Government Proposes To Launch Official Digital Currency: What Experts Say )