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According to Grayscale Bitcoin Trust, Bitcoin price rose 20.6%, its highest since mid-January.
It’s hard to predict the correct Bitcoin price. Analysts often face difficulty putting a value on it as they do with a traditional company. There are no annual earnings or dividends to refer to or leadership teams to evaluate. Despite these hiccups, the digital currency has remained a Wall Street darling for past several months. The latest love letter to Bitcoin comes from America’s most valuable automaker, Tesla Inc.
Bitcoin price on Tuesday hit a record above $47,000 after Tesla’s announcement of a fresh $1.5 billion injection in the red-hot currency. The electric vehicles maker also said it would begin accepting Bitcoin as a form of payment for its cars, trucks and other products.
Bitcoins worth more than $30 billion are held by companies using them alongside traditional reserves such as cash and shares.
This is the biggest endorsement the controversial cryptocurrency has received from a mainstream company. Elon Musk, Tesla’s founder and the world’s richest man, has been raving over the cryptocurrency for past several months, inducing the much-talked about Bitcoin rally that lasted several weeks until the end of the year.
Tesla, Inc. revealed in a regulatory filing with the Securities and Exchange Commission on Monday that it has acquired $1.5 billion in Bitcoins in January. The revelation soared Bitcoin price to around $44,203, a significant gain of over 13% in early trade on CoinDesk.
In more volatile markets, Bitcoin price momentarily touched $47,000 for the first time before it boomerang. It was last traded at $45,669.
“In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity,” Tesla said in a 10-K filing with the U.S. SEC.
“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, which we may or may not liquidate upon receipt,” the filing continued.
The $1.5 billion worth of Bitcoin will give the electric vehicles maker liquidity in the digital currency once it begins accepting Bitcoin for payments. The automaker had more than $19 billion in cash and cash equivalents at the end of 2020, according to its most recent regulatory filing.
According to Julius de Kempenaer, a senior technical analyst at StockCharts, Tesla’s decision may prove to be a game changer for Bitcoin. It may be “a catalyst for other companies to go that route,” said de Kempenaer.
This sentiment is shared by several analysts on the Street who believe that Tesla’s vote of confidence in the crypto could open the door for wider corporate adoption.
Bitcoin has garnered growing interesting and confidence over past several months. According to the currency tracking website, BitcoinTreasuries, Bitcoins worth more than $30 billion are held by companies using them alongside traditional reserves such as cash and shares. Industry leaders such as PayPal, Square, MicroStrategy and others have made significant investments in Bitcoin as a part of corporate asset allocation strategy.
Back in the September of 2020, enterprise-software company MicroStrategy said it is investing in Bitcoin and putting the digital currency in place as a reserve asset for the entity. “In an expansionary, monetary environment, you want scarce assets,” said Michael Saylor, MicroStrategy Inc.’s chief executive officer, in an interview on Bloomberg Television. “The scarcest asset in the world is Bitcoin. It’s digital gold.”
Saylor has been one of the foremost proponents of converting company cash to Bitcoin. The Federal Reserve’s relaxing of its inflation policy helped convince him to invest the company’s reserves. MicroStrategy holds approx. 71,079 Bitcoins, according to a February regulatory filings. The holdings are valued at $3.2 billion based on Monday’s price. The CEO even issued $650 million in convertible bonds to help finance the purchases.
According to Grayscale Bitcoin Trust, Bitcoin price rose 20.6%, its highest since mid-January. Gold, on the other hand, jumped a meager 1% while etherum, another cryptocurrency, jumped a record high.
At the beginning of the year, American investment bank JP Morgan made a bold long-term price target for Bitcoin, claiming the cryptocurrency could rally as high as $146,000 as it eats into gold’s market share. It hasn’t even been a month since the Bitcoin price prediction has been made and the cryptocurrency is already making headlines for its record-breaking surges.
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