Bitcoin sets fresh records after Elon Musk investment

3 weeks ago
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Bitcoin has made fresh gains a day after Tesla said it had bought about $ 1.5bn (£1.1bn) of the cryptocurrency.

Bitcoin hit a new peak of $ 48,216 (£34,991) before sliding back slightly, but it still remains 25% higher than five days ago.

Some investors took Tesla’s move as a signal that Bitcoin would become a mainstream financial asset.

However, there was some criticism about a green car firm investing in such an energy intensive currency.

Bitcoin currently uses more energy than Argentina per year, according to the Cambridge Bitcoin Electricity Consumption Index.

Production of the cryptocurrency, known as “Bitcoin mining” needs energy-hungry computer hardware, and ever-greater amounts of processing power.

Mike Butcher, an editor at Techcrunch, tweeted: “Tesla: Sells carbon credits to buy Bitcoin, which requires as much energy (not always Green energy) as a small country to mine.”

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Shares of companies that provide trading platforms for Bitcoin and the technology to “mine” the cryptocurrency have surged in China, South Korea, and Australia, and big computer chip making companies such as SK Hynix also rose.

The cryptocurrency has already risen in value by 62% this year, on top of a 300% rally in 2020, as investors search for alternative assets with many countries’ interest rates at record lows.

Bitcoin has had some interest from money managers, including Blackrock, which recently changed a handful of investment mandates to allow some of its funds to invest in the currency.

However, central banks remain sceptical about the cryptocurrency. In October, Bank of England governor Andrew Bailey cautioned over Bitcoin’s use as a payment method.

Some institutional investors are also wary of the price volatility of Bitcoin.

Robert Pavlik, senior portfolio manager at Dakota Wealth, said: “The average institutional investor is shaking their head.

“For these folks who are believers in cryptocurrency, it [Tesla’s investment] gives them another layer of support that crypto is the future.”

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