By Eurasia Business News – February 8, 2021
Over 2020 the value of bitcoin grew by 300% – Photo credit : Pexels
The price of Bitcoin rose sharply by 14% on February 8, gained $ 5,500 in an hour and reached a new all-time high at around $ 45,000.This happened amid Tesla’s announcement of the purchase of $ 1.5 billion of coins.
On the Binance crypto exchange, the Bitcoin rate rose to $ 44,918, for the first time exceeding the $ 44,000 mark, after which it decreased. As of 18:00 Paris time, the first cryptocurrency was trading at $ 42.9 thousand.
The Ethereum cryptocurrency has also jumped by 13.8%, reaching $ 1,709.
The sharp rise in the price of Bitcoin began after the company Tesla reported to the US Securities and Exchange Commission (SEC) that it had invested $ 1.5 billion in Bitcoin in January.
“In January 2021, we updated our investment policy to be able to maximize returns on funds that are not required to maintain sufficient liquidity,” said Tesla in a statement.
“As part of this policy, which has been duly approved by the audit committee of our board of directors, we may invest a portion of this cash in certain alternative reserve assets, including digital assets, gold, ETFs on gold and other assets” added Tesla.
In addition, the automaker says it expects to start accepting bitcoin as a means of payment for its products in “the near future” in accordance with the US regulation.
The company stressed that they understand the risks associated with the volatility of digital money, lack of regulation, as well as their exposure to cyberattacks.
In March 2020, the rate of the first cryptocurrency fell to a local minimum of $ 3.8 thousand, amid coronavirus outbreak worldwide and lockdowns of economies. Since then, Bitcoin has risen in price by 1084%. Capitalization of the crypto-asset exceeded $ 810 billion for the first time, with daily trading volumes reaching $ 85.6 billion, according to CoinMarkertCap.
Amid a sharp increase in trading volumes on Binance, some problems have been reported, said the trading platform on its Twitter account, many users cannot access. Exchange representatives acknowledged the problem and reported on work on fixing it.
Tesla, founded by the tech tycoon Elon Musk, made the largest Bitcoin purchase of any public company. Prior to that, the leader was the business intelligence firm MicroStrategy, which acquired 71 thousand bitcoins for $ 1.145 billion.
This growth of Bitcoin price comes as Elon Musk, founder of Tesla and the second richest man in the world, recently declared himself a supporter the cryptocurrency. He notably modified his Twitter biography on Friday, January 29, to leave only a “#bitcoin” which had jumped the price of the cryptocurrency by more than 14%.
Lastly, Elon Musk would have said during a discussion on the Clubhouse audio app in early Febuary that “I think bitcoin is on the verge of getting broad acceptance by conventional finance people.”
A tool against inflation
Bitcoin is likely to continue to rise in value as it is used to hedge against inflation and the consequences of pandemics. This bitcoin rush would be favoured in particular by the status of the cryptocurrency against the depreciation of “classic” currencies, by the interest aroused among an increasingly wide range of institutional investors and the growth of the blockchain industry.
The adoption of the $ 900 billion Covid-19 stimulus package in the United States on December 22nd can fuel inflation expectations in 2021, which may favour the use of cryptocurrencies by investors as a hedge against inflation. Much like gold, Bitcoin has proven that it can be a substitute for failing currencies, as is the case in Venezuela, Argentina or Turkey. These countries experienced very high inflation rates in 2018 and 2019.
The US President Joe Biden’s $1.9 trillion covid-19 relief plan, added to the stimulus measure the Congress passed in December 2020, represents the boldest act of macroeconomic stabilization policy in U.S. history. However, massively injecting liquidity in national markets and in bank accounts of American households, even if they need it, creates a mechanical risk that inflation expectations will rise sharply, eroding the value of US dollar.
In a column published in the Washington Post, Lawrence Summers, US Treasury Secretary during the Clinton administration, warned of the risk that massive macroeconomic stimulus would set of inflationary pressures of a kind not seen in a generation, with consequences for the dollar and financial stability.
This is all the difficulty in making policy to fight unemployment and supporting economic growth. Therefore, investors may turn further to crypto-currencies to protect their assets against the damages caused by high inflation.
Read also : Bitcoin crosses $ 30,000 for the first time
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