Bitcoin’s impressive price rise has made headline over the last several months. Here’s a look at three things investors might not know about the cryptocurrency.
Despite being one of the most in-demand assets of 2020, there is still a lot of mystery surrounding bitcoin and cryptocurrencies in general.
Rising from US$4,000 in March 2020 to more than US$57,000 in February 2021, bitcoin has soared 1,175 percent, topping out with a market cap of more than US$1 trillion.
The rapid rally prompted investment bank Citigroup (NYSE:C) to state that bitcoin has hit a watershed moment that may result in it becoming the currency of global trade.
“There are a host of risks and obstacles that stand in the way of bitcoin progress,” Reuters quotes the bank as saying in early March. “But weighing these potential hurdles against the opportunities leads to the conclusion that bitcoin is at a tipping point.”
Last November, the American bank projected that bitcoin could reach US$300,000 by December 2021. It called the digital cash the “new gold,” comparing its performance to that of the yellow metal in the 1970s.
Gold price performance, 1970 to 1980. Chart via the World Gold Council.
Between January 1, 1970, and January 1, 1980, the value of gold rocketed 1,326 percent, rising from US$35.17 per ounce to US$512.
Bitcoin price performance, March 2020 to March 2021. Chart via CoinDesk.
With bitcoin mimicking some of the trends that have benefited gold in its ascent to record territory (US$2,063 in August 2020), the Investing News Network took a look at some of the lesser-known things regarding this emerging asset class. Read on to learn more.
1. Bitcoin is not legal tender
One of the hindrances to bitcoin’s early growth was the ability to actually spend it anywhere. While the tech savvy sang the praises of the digital money, most were confused as to what they would do with it.
Now the list of companies that accept bitcoin as payment is beginning to grow, reaching the likes of Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA), Visa (NYSE:V) and MasterCard (NYSE:MA).
Widespread adoption will be key in moving the value of bitcoin higher; however, it’s important for potential bitcoin adopters to be aware that the world’s first cryptocurrency is not considered legal tender. That means bitcoin is not an acceptable payment method for debt.
“Only the Canadian dollar is considered official currency in Canada,” notes the Canadian government on an information page about digital currencies. “Digital currencies are not supported by any government or central authority, such as the Bank of Canada.”