Published: February 19th, 2021
Another week, another bitcoin breakthrough. The price of Bitcoin broke the USD 50,000 barrier on Monday, going as high as USD 50,550. The most recent upswing came after MicroStrategy’s announcement that it’s investing another USD 600 million in BTC.
The company said it plans to sell an equivalent amount of convertible notes to institutional investors and use the proceeds to buy-up more Bitcoin. That would add significantly to the 71,080 BTC it already holds, currently valued at around USD 3.5 billion.
In an announcement shared with the press, MicroStrategy said it would also give investors the option to buy an additional USD 90 million in convertible notes, which will also be used to purchase more Bitcoin.
Since crossing the USD 42,000 line in mid-January, Bitcoin spent weeks floating back and forth between USD 30,000 and 40,000, prompting market watchers to wonder whether or not BTC had sufficient momentum to keep going higher. On the eighth of February, electric car manufacturer Tesla said it had invested USD 1.5 billion in Bitcoin, giving the cryptocurrency the boost it needed to go above USD 42 and beyond. This week it started breaking records again.
Analysts say the Tesla announcement prompted the latest price rally. Many people inside the crypto industry and beyond anticipated the move was coming. Tesla CEO Elon Musk had been tweeting positively for months about Bitcoin and touting its potential merits.
Since the company took its USD 1.5 billion stake in BTC, the cryptocurrency’s price has moved rapidly from USD 38,800 to move past USD 50,000, a 30 per cent increase overall.
Taken together, investors are treating the MicroStrategy and Tesla moves as a vote of confidence by big, publicly-traded companies and traditional financial institutions in Bitcoin. That’s making BTC more attractive to a wider stable of investors as an asset.
Tesla’s impact on Bitcoin’s price began well before the company made its purchase public. CEO Musk has been helping drive the price of Bitcoin up for at least a month.
At the end of January, Musk kicked-off a new Twitter trend when he added the word ‘Bitcoin’ to his account bio. Many of the Tesla CEO’s 47 million social media followers quickly did the same.
It was a very modern kind of celebrity endorsement, with viral YouTubers and professional athletes following Musk’s example. They updated and shared their new Bitcoin Twitter bios with a massive audience of followers.
But he hadn’t finished. The same day he tweeted, cryptically, that … ‘In retrospect, it was inevitable,’ possibly a reference to his bio – or something else? The resulting social media furore compelled managers at crypto exchange Binance to add extra capacity to deal with the spike in BTC demand.
A study conducted by Blockchain Research Lab suggests that Musk’s BTC-related tweeting drove a significant (and abnormal) rally for Bitcoin that saw its price peak by 20 per cent in under eight hours.
A few days following the celeb-fuelled pump of Bitcoin’s price, Tesla's high-profile USD 1.5 billion buy hit the news. There was the investment announcement itself — coming a few days after a MicroStrategy press conference where it’s CEO encouraged companies to get into Bitcoin. Then there was the follow-on news that Tesla planned to start taking Bitcoin payment for its cars and related products.
That generated a lot of buzz, but in reality, big companies had been moving into BTC for some time. They just did it without press and social media fanfare.
A long list of institutional investors has been quietly increasing its Bitcoin holdings for months.
MicroStrategy made a series of buys amounting to USD 425 million between August and September last year. CEO Michael Saylor was widely praised in crypto circles for blazing a new trail and helping legitimise Bitcoin investment.
The MicroStrategy’s move was followed by a USD 50 million Bitcoin purchase by Twitter co-founder Jack Dorsey’s Square in October. At the time, this represented a full one per cent of the business’s total assets.
With Bitcoin finally garnering large institutional investments, praise for the digital currency began to roll in from some of traditional finance’s big beasts.
Billionaire speculator Stanley Druckenmiller has said Bitcoin could offer better returns than gold. At the same time, former hedge fund star Raoul Pal committed three-quarters of his assets to Bitcoin investments in November last year.
That same month, PayPal told the press that American customers could start using Bitcoin for trades and payments. At the start of 2021, close to eighteen per cent of PayPal users had said they had used PayPal’s new crypto capabilities.
It’s all combined to drive a wave of institutional investment in BTC that’s provided the world’s leading crypto with an opportunity to go mainstream.
The price of BTC now moves into uncharted territory. February 2021 marked the first time that bitcoin has ever been priced above USD 50,000.
With the arrival of a high-profile, publicly-traded tech brand like Tesla to Bitcoin investments, the crypto clearly turned a corner in terms of its acceptance by traditional ‘legitimate’ finance.
Strategists at Skybridge Capital believe Bitcoin’s price will keep on climbing upwards, potentially hitting USD half a million if large institutions keep expanding their Bitcoin positions.
Exciting as that prospect might be for the crypto community, price rises are only part of the picture. Bitcoin’s watchers believe the next logical step for BTC is to find mass acceptance as a form of payment, and a retail investment asset.
The first country to say yes to Bitcoin as a form of cash and even add BTC to its reserve currency stores could gain a first-mover advantage. If that happens, they say, Bitcoin’s price will head skyward. Which nation will be first to make the leap?