In a previous article we highlighted one prediction that Bitcoin will hit the $50,000 mark during 2021. On February 10, Bitcoin reached a 24-hour high or $47,536. Investors have realized year-to-date returns of just over 51% in their Bitcoin holdings.
One investor who primed the Bitcoin market was Elon Musk, Tesla CEO and one of the world’s richest men. In a Monday, February 8 SEC filing, the electric automaker said Tesla may soon accept Bitcoin as a payment for its cars.
Also, according to the filing, Tesla “invested an aggregate of $1.5 billion in Bitcoin. That move excited Bitcoin investors and raised its value to a new all-time high. One analyst noted that “Musk and Tesla are diving into the deep end of the pool of bitcoin and crypto,” which could mean more gains for Tesla shares.
(Tesla underwent a 5-for-1 stock split last year, dividing its sky-high $2,200 price per share into $436 increments. Share value as of February 10, 2021 was over $800.)
“I do at this point think Bitcoin is a good thing, and I am a supporter of Bitcoin…I mean I clearly should have at least bought some Bitcoin eight years ago,” Musk said.
Eight years ago, Bitcoin had not fully shed its bad-boy image. The digital currency first started trading on the stock exchange at a paltry 8 cents per coin in mid-2010. Bitcoin’s inventory Satoshi Nakamoto designed it as a way to get around traditional banking infrastructure after the 2008 world-wide financial crash.
Since its introduction, Bitcoin has had a volatile trading history, undergoing multiple bursting bubbles. Once considered the dark-web medium of choice for online drug deals, Bitcoin has in recent years attracted interest from institutional investors. Frank Holmes, writing for ETF Trends predicts that the current surge in Bitcoin value won’t result in a crash similar to 2017.
“I’ve seen numerous market ‘experts’ declare this another crypto bubble similar to 2017,” Holmes wrote. “But unlike then, the current run-up is driven not just by retail investors but also big-name investors, institutions, hedge funds and more.”
On the other hand, American giant automaker GM, according to a CNBC market report “has no interest in following Tesla and investing in Bitcoin.” CEO Mary Barra hasn’t ruled out accepting Bitcoin payments from its customers, though: “This is something we’ll monitor and we’ll evaluate. If there’s strong customer demand for it in the future, there’s nothing that precludes us from doing that.
One factor that might keep GM away from Bitcoin payments would be that, unlike Tesla, GM doesn’t sell its products directly to consumers. It has a dealership network of individual franchises. If GM goes down the Bitcoin road, it would have to work the details out with its dealers and align their accounting systems.
So, despite being labeled as a fad and crypto-Ponzi scheme, Bitcoin has weathered bubbles and crashes and received a modicum of investment respectability. As a hedge against inflation and another way to diversify investment portfolios, Bitcoin could turn out to be what Elon Musk praises as “digital gold.”