Bitcoin pulled back from a record high on Monday and other cryptocurrencies slipped, as investors took profits from a record-breaking rally that had pushed bitcoin close to $50,000. Bitcoin fell as much as 5.6% to $45,914 in Asian trading hours after having to post a record peak of $49,714.66 on Sunday, while rival crypto ethereum slid more than 8%.
Rival cryptocurrency Ether hit a record on Saturday and is up about 150% year-to-date. Once on the fringes of finance, bitcoin is fast gaining legitimacy as an asset class and has leapt 20% in the week since electric carmaker Tesla Inc announced it had $1.5 billion in bitcoin and would accept the currency as payment. It is up more than 60% for the year to date and has gained more than 1,100% since hitting a one-year low last March.
Bitcoin has been buoyed in recent months by endorsements from the likes of Paul Tudor Jones and Stan Druckenmiller. Morgan Stanley may bet on Bitcoin in its $150 billion investment arm, following news late last week that BNY Mellon plans to service cryptocurrencies for its clients. And that’s after Tesla Inc. put about $1.5 billion into Bitcoin. Sceptics warn the asset class could be in a bubble, however. Tesla Boots the Bitcoin Bandwagon Closer to Corporate America.
Last week, Tesla said it may soon accept the digital currency as payment for its cars. And Tesla, (TSLA) the most valuable car company on the stock market, said it is holding some of its cash in bitcoin rather than traditional currency. On Wednesday, Mastercard announced it will support “select cryptocurrencies” directly on its network at some point later this year. That represented a major milestone for bitcoin: Square (SQ) and PayPal (PYPL) recently began allowing customers to trade bitcoin, but Mastercard will be bitcoin’s most mainstream, major platform yet.
Investors have sent the price of bitcoin skyrocketing during the pandemic as the Federal Reserve cut interest rates to near zero in March 2020 (and expects to keep them there for several more years), severely weakening the US dollar. That makes bitcoin, comparatively, an attractive currency. There’s a set limit to the number of bitcoins on the planet, and investors believe that once the supply runs out, the digital coin’s value can only increase. As bitcoin surges to all-time highs, big, name-brand investors are stockpiling it, and huge consumer companies are embracing it, aiding in bitcoin’s soaring valuation.
