Bitcoin and Dogecoin are boosted by Elon Musk
SAN FRANCISCO – Bitcoin hit a new high above $ 47,000 on Monday, rising more than 45% since the start of the year.
Other digital currencies – with names like Terra and Solana – have also risen sharply in value.
Even Dogecoin, a cryptocurrency that started out as a joke with a perpetually surprised Shiba Inu dog for its symbol, has climbed nearly 1,000% over the past week to set a record.
The rally is a time of euphoria for the thousands of different versions of digital money, which years ago were dismissed as little more than online Beanie Babies caught in a bubble. While cryptocurrencies often rise and fall together, the latest wave stands out for its magnitude – for the first time, the value of all cryptocurrencies has skyrocketed above $ 1 trillion in the month. last – as well as the number of people using digital tokens for practical purposes and the key players involved.
On Monday, the apparent reason for the rally was an announcement from Tesla, the electric car company run by Elon Musk, the richest person in the world. Tesla said he bought $ 1.5 billion worth of Bitcoin and would start accepting Bitcoin payments, sparking an interest frenzy.
But the underlying momentum of a peak has been building slowly for about a year. During this time, PayPal joined other mainstream apps that allow their users to buy, hold, and sell cryptocurrency. Some of the biggest hedge fund operators in the world – like Paul Tudor Jones and Stanley Druckenmiller – have also invested money in the new market, a sign that they are increasingly seeing cryptocurrencies as an asset. gold.
“This is just a drastic change in sentiment,” said Meltem Demirors, chief strategy officer at CoinShares, a cryptocurrency asset manager. “We’ve gone from being mocked and ridiculous to having the richest man in the world talking about it.”
The rally follows a recent binge on the stock of video game retailer GameStop, which was also fueled by social media memes and joke tweets from Mr. Musk. Joshua Gans, professor of innovation at the University of Toronto School of Business, said the two run-ups feature a new generation of investors who have had a lot of free time in the pandemic and who have had few good options to spend their money on. As a result, they became more interested in the investments that are talked about online, he said.
Buying and trading stocks and cryptocurrencies has also become simpler and more accessible, Mr. Gans said. Square and the Robinhood trading app have both introduced cryptocurrency and stock trading in recent years. Last year, PayPal also added cryptocurrencies to its app, expanding the audience.
“People didn’t have excess cash before and the time to ‘learn’ how to trade,” Gans said. Now stocks and cryptocurrencies are “easier to ‘buy’ than ever.”
Cryptocurrencies started popping up in 2009 after someone known as Satoshi Nakamoto – whose true identity has never been revealed – released Bitcoin’s rules and software. Virtual currency, which has no physical medium, could be sent electronically from one user to another, anywhere in the world. Bitcoin was run by a decentralized network of computers that kept track of all transactions, so it could not be controlled by a government or a business.
Bitcoin was originally described as a way to pay for things online. But the need for transactions to go through the decentralized system slowed down payments.
Over time, investors became more interested in Bitcoin because it was not controlled by any government or company. The software that sets the rules for Bitcoin also allows only 21 million Bitcoin to be created, so it was a scarce resource.
These qualities have created periods of boom and bust for Bitcoin and other digital currencies. In 2017, after a rapid surge, the price of Bitcoin collapsed. But since the coronavirus pandemic, a new set of powerful investors and companies have entered the market.
They have included hedge fund operators like Mr. Tudor Jones and Mr. Druckenmiller, as well as Ray Dalio, the founder of Bridgewater. While Mr Dalio expressed his skepticism about Bitcoin last November, he published an essay last month after further study describing cryptocurrency as “hell of an invention.” He added that he was considering putting money into Bitcoin.
Other Bitcoin supporters include Jack Dorsey, the CEO of Twitter and Square. Square invested $ 50 million in Bitcoin at the end of last year. And Mr Dorsey, whose Twitter profile is #bitcoin, has often tweeted about the qualities of virtual currencies.
Last year, Michael Saylor, managing director of software company Microstrategies, also put money on his company’s balance sheet in Bitcoin. He has since seen it triple in value to around $ 3 billion, according to the Bitcointreasuries.org site. Mr Saylor said he made the decision because he believed the value of traditional currencies would drop over time, making Bitcoin’s scarcity more valuable.
“For anything that anyone who has invested in as a store of value, it seems like it’s best to move it into Bitcoin,” Mr. Saylor said in November.
Mr. Musk spoke with Mr. Saylor on Twitter in recent months to emulate this strategy. Then in a Monday filing, Tesla said it bought $ 1.5 billion worth of Bitcoin to “maximize the returns on our money.”
Mr. Musk has stoked the cryptocurrency fever through other tweets. Last month, Mr. Musk followed Mr. Dorsey by changing his Twitter profile to #bitcoin. He deleted that description a few days ago, but has posted other encouraging – and sometimes cryptic – posts about virtual currencies.
He also referred to Dogecoin, a coin created in 2012, as a fun experience for people to try out the technology. Over the past month, Mr. Musk has gone from posting cryptic jokes on Dogecoin (“One Word: Doge”) to semi-serious arguments why he could be taken seriously (“Doge appears to be inflationary, but really isn’t”).
Other celebrities then took up the Dogecoin cause with their own viral tweets. Rapper Snoop Dogg responded to a tweet from Mr. Musk on Saturday with a photo of himself as Snoop Doge.
Beyond people looking for the latest joke online, more are using cryptocurrencies for more serious purposes. Ethereum, the second most valuable digital token, has spawned applications that enable new types of financial transactions. Unlike Bitcoin, which only supports the storage and movement of money, Ethereum allows a computer network to be used for more complex types of calculations and transactions.
A popular Ethereum-based app called Aave allows people to lend and borrow cryptocurrencies, with interest payments transferred directly between users without any financial companies involved.
As of Monday, the system had more than $ 5 million in loans outstanding, according to the DefiPulse site. Ethereum also hit a high of $ 1,776 on Monday, according to Coinbase, up 134% year-to-date.
“In 2017, people were just buying anything that was on sale,” Ms. Demirors said. “Now people know what they’re buying and they’re asking smart questions. It is very different. “
Michael J. de la Merced and Ephrat Livni contribution to reports.