Bitcoin powered to a record high on Tuesday, approaching the $50,000 mark, basking in the afterglow of Elon Musk-led Tesla’s investment in the cryptocurrency that had investors believing it may become a mainstream asset class.
The most popular cryptocurrency has gained 1,150 percent since its March 2020 lows; as institutional investors searched for alternative investments and retail traders rode the wave. It traded at a few hundred dollars only five years earlier. Glassnode, which provides insight on blockchain data; said in its latest report that bitcoin’s limited supply suggested further gains for the virtual asset.
Bitcoin’s liquid supply is continuing to decrease, as investors increasingly acquire and “hodl” the asset for the long term. “Hodl” is crypto slang for the act of an investor holding the asset instead of selling it.
Currently, around 78 percent of issued bitcoin are either lost or being “hodled”. This leaves less than four million bitcoins to be shared among future market entrants — including large institutional investors such as PayPal, Square, S&P 500 companies, and exchange-traded funds, Glassnode said.
On Monday, bitcoin leapt 20 percent after Tesla announced it had a $1.5bn investment and that it would eventually take the cryptocurrency as payment for its cars. That was its largest daily rise in more than three years.
Bitcoin climbed to a peak of $48,216.09 — almost enough to buy one of the best-selling Tesla vehicles; the Tesla Model Y SUV. Rival cryptocurrency Ethereum struck a record high of $1,825.36 on Tuesday
Musk’s foreseeing acceptance of the currency as payment for Tesla cars has analysts reckoning this is a large shift as companies and big investment houses follow small traders into the asset.
Marc Chandler, the chief market strategist at Bannockburn Global Forex, remains unconvinced and said bitcoin remains a speculative vehicle.
“The fact that it draws some institutional investors or even some companies does not change this fact: bitcoin has no earnings stream that can be modeled,” said Chandler. “It has no break-up or replacement cost. There is no intrinsic value. They have no use-value the way economists understand it.”