Cryptocurrency Bitcoin has continued to edge towards the investment mainstream following endorsement from Elon Musk’s electric car manufacturer Tesla, which has bought well over $1bn worth of the cryptocurrency.
Tesla said it bought $1.5bn worth of Bitcoin in January as part of a strategy to maximise returns on cash that is not being used in the day-to-day running of the company.
Since Sunday the price of Bitcoin has surged by some 19% to stand at $46.284 on the morning of 9 February.
“One of the criticisms of Bitcoin is that far too few vendors accept it as legal tender but as more well-known names accept it, that should help bring it a step further to becoming more mainstream,” David Madden, market analyst at CMC Markets UK, told City AM.
“Four months ago, PayPal announced it would facilitate Bitcoin payments, which gave the cryptocurrency a shot in the arm,” he added.
Such comments come despite continuing alarming volatility in the price of the cryptocurrency as prices have swung wildly over the past 12 months. During the worst of the sell-off in March last year, prices fell as much as 63 per cent from highs hit just weeks earlier.
The cryptocurrency has since surged in value and is up tenfold from last year’s lows.
Indeed, some analysts are now waiting for the next big push above $50,000, which could be driven by other major companies looking for alternative assets that can compensate for persistently low interest rates.
While some investors and analysts continue to hold faith in Bitcoin, others are much more wary.
Despite being held as the new forefront of payments technology, Bitcoin and other cryptocurrencies have attracted sceptics from central bankers and other financial heavyweights amid concerns over the stability of their value as well as their unregulated nature.
Last year, for example, the governor of the Bank of England Andrew Bailey warned that digital currencies such as Bitcoin will not last long in their current form due to a lack of design and governance that will give them staying power in global finance.
Bailey said while digital innovation in payments was likely to remain, cryptocurrencies in their current form were unlikely to last.
“There have been huge innovations in payments in recent years but we still have some very big gaps to fill…Have we landed on what I would call the design, governance and arrangements for a lasting digital currency? No, I don’t think we’re there yet. I don’t think cryptocurrencies as originally formulated are it”, Bailey said.
However, the central bank governor said there is room for innovation, particularly concerning cryptocurrencies that derive their value from a different asset or basket of assets such as the US dollar or gold.