Bitcoin on Tuesday extended a sharp rally that has been mostly fueled by big investors beginning to take digital assets seriously. The cryptocurrency hit a new record high of $60 shy of $50,000 on the day.
The first and most famous cryptocurrency, bitcoin hit $49,938 and has gained roughly 70% this year, most of that after electric carmaker Tesla said it bought $1.5 billion in bitcoin and would accept the currency as payment.
Tesla’s move was the latest in a string of large investments that have vaulted bitcoin from the fringes of finance to company balance sheets and Wall Street dealing desks, as U.S. firms and traditional money managers have started to buy a lot of it.
The soaring cryptocurrency, which was near worthless a decade ago when software developer Laszlo Hanyecz paid 10,000 bitcoins for two pizzas, surpassed $20,000 only in mid-December but has so far struggled to crack $50,000 after a few attempts.
“Bitcoin has been range bound for the past four or five days, suggesting either stalling momentum or a consolidation period,” said Justin d’Anethan, sales manager at digital asset company Diginex in Hong Kong.
“We believe in the latter,” he said since strong recent demand has been drawing down bitcoin’s finite supply.
Bitcoin last traded just short of its new record at $49,045 while rival cryptocurrency ethereum also held near its own record top of $1,879 made last week.
Besides Tesla, bitcoin has drawn unprecedented flows from big and small investors in recent months and posted new milestones on the path to greater takeup as a mode of exchange.
The cryptocurrency was created by the mysterious Satoshi Nakamoto, whose real identity is unknown and is based on blockchain technology which acts like a public ledger of transactions. It began circulating in 2009, mostly among speculators – something which is beginning to change.
Business software firm MicroStrategy made the first of several multimillion-dollar bitcoin purchases in August and a number of Wall Street fund managers, such as billionaire Stanley Druckenmiller, now sound positive on the asset.
PayPal is allowing customers to use bitcoin at its merchants and Mastercard is preparing to do likewise, moves which bring both opportunity and risk.
“The more mainstream the digital currency becomes, the more we should expect regulators to pay attention,” said Mike O’Rourke, chief market strategist at JonesTrading.