Bitcoin rockets to record high of $48,000 after Elon Musk's Tesla buys up $1.5 billion - with one backer saying the currency could hit $100,000 in 2021
- The bitcoin price continued to break records, touching $48,000 before slipping back slightly.
- Elon Musk's Tesla said it had bought $1.5 billion of bitcoin, fuelling a cryptocurrency rally.
- Michael Novogratz said other companies would follow suit, although some analysts were skeptical.
The bitcoin price jumped to an all-time high of above $48,000 on Tuesday morning as investors rushed into the asset after Elon Musk's Tesla said it had bought up $1.5 billion of the cryptocurrency.
Bitcoin then slipped back slightly, but was up 6% to $46,214 as of 9am ET. One major bitcoin investor said he saw the price rising to $100,000 by the end of the year.
Musk's electric car company Tesla caused a stampede into the digital currency on Monday, when it revealed it had bought up $1.5 billion of bitcoin in January. Tesla also said it planned to start accepting bitcoin as payment.
The rally continued on Tuesday morning, taking bitcoin's gains to more than 1,000% since the March 2020 low of around $4,000.
Michael Novogratz told Bloomberg TV on Monday that he thought the bitcoin price could more than double to $100,000 by the end of 2021 as big-name firms get behind the currency.
"You're going to see every company in America do the same thing [as Tesla]," Novogratz, the founder of crypto investment firm Galaxy Digital, told Bloomberg.
"One of the things that connect bitcoin and Tesla and solar stocks and ESG investing is millennials and gen Z.
"Young people are buying into the future, and they see cryptocurrencies - bitcoin and other cryptos - as their currencies," he said.
Bitcoin rival ether, the native cryptocurrency of the Ethereum network, also rose sharply to record highs as the Tesla-driven rally spread to other cryptocurrencies.
The ether price was up 1.4% to $1,742 on Tuesday morning, having earlier touched a record level above $1,800. CME Group launched trading in ether futures on Monday, helping the currency.
Derek Halpenny, head of global markets research at MUFG in Europe, said of Tesla's move: "Any steps taken that has the potential to improve credibility and lift bitcoin as a more viable means of exchange is going to be positive."
However, Jerry Klein, managing director at Treasury Partners, said: "It remains to be seen how shareholders would react if a decline in bitcoin's price negatively affects Tesla's future earnings."
Many analysts said a falling dollar could support the bitcoin price further, with some investors seeing the cryptocurrency as a hedge against a drop in the value of traditional currencies.
The dollar index was down 0.35% to 90.62 on Tuesday after a strong run. Investors broadly think record amounts of stimulus and low interest rates will weigh on the greenback in 2021.
Edward Moya, senior market analyst at currency firm Oanda, said: "All eyes are for bitcoin to hit $50,000 at some point in the near future, and it could go much further if the dollar resumes its slide.
"Bitcoin volatility remains elevated, but it looks like we are at the beginning of the breakout from a consolidation pattern. If crypto-mania continues, $60,000 could become a reality before the quarter ends."