Bitcoin and Dogecoin Are Boosted by Elon Musk

SAN FRANCISCO – Bitcoin hit a new high of nearly $ 45,000 on Monday, up more than 45 percent since the start of the year.

Other digital currencies – with names like Terra and Solana – also appreciated sharply.

Even Dogecoin, a cryptocurrency that started as a joke with a consistently surprised Shiba Inu dog as a symbol, has risen nearly 1,000 percent in the past week to set a record.

The rally is a moment of euphoria for the thousands of different versions of digital money that years ago were dismissed as little more than online beanie babies trapped in a speculative bubble. While cryptocurrencies often rise and fall together, the most recent surge is marked by its magnitude – for the first time the value of all cryptocurrencies surged over $ 1 trillion in the last month – as well as the number of people the digital tokens are used for practical purposes and the main actors involved.

On Monday, the alleged reason for the rally was an announcement from Tesla, the electric car company owned by Elon Musk, the richest person in the world. Tesla said it bought $ 1.5 billion worth of bitcoin and would start accepting bitcoin payments, causing a maddening of interest rates.

However, the underlying momentum for an increase has been slowly increasing for about a year. During this period, PayPal has joined other consumer apps that allow users to buy, hold, and sell cryptocurrencies. Some of the largest hedge fund operators in the world – like Paul Tudor Jones and Stanley Druckermiller – have also poured money into the emerging market, a sign that they are increasingly viewing cryptocurrencies as an asset like gold.

“It’s just a fundamental change in sentiment,” said Meltem Demirors, chief strategy officer at Microshares, a cryptocurrency asset manager. “We were no longer mocked and mocked, but the richest man in the world spoke about it.”

The rally follows a recent frenzy for video game retailer GameStop’s inventory, which was also fueled by social media memes and Mr. Musk’s joke tweets. Joshua Gans, a professor of innovation at the University of Toronto’s Business School, said that both attempts represented a new generation of investors who had long time in the pandemic and had few attractive ways to spend their money. As a result, they are more interested in investing that is talked about online, he said.

Buying and trading stocks and cryptocurrencies has also become easier and more accessible, Gans said. Square and the trading app Robinhood have launched both cryptocurrency and stock trading in the past few years. Last year, PayPal also added cryptocurrencies to its app to expand its audience.

“People have never had excess money or time to learn about trading,” said Gans. Now stocks and cryptocurrencies are “easier than ever to buy”.

Cryptocurrencies emerged in 2009 after someone named Satoshi Nakamoto – whose true identity was never revealed – published the rules and software for Bitcoin. The virtual currency, which has no physical background, can be sent electronically from one user to another anywhere in the world. Bitcoin was powered by a decentralized computer network that tracked all transactions and therefore could not be controlled by any government or company.

Bitcoin was originally described as a way to pay online. However, the need for transactions to go through the decentralized system made payments slow.

Over time, investors became more interested in Bitcoin as it was not controlled by any government or company. The software that sets the rules for Bitcoin also enables only 21 million Bitcoin to ever be created. So it was a scarce resource.

These properties have led to boom and bust periods for Bitcoin and other digital currencies. In 2017, the price of Bitcoin plummeted after a rapid surge. But since the coronavirus pandemic, new powerful investors and companies have hit the market.

These included hedge fund operators like Tudor Jones and Druckermiller, and Ray Dalio, the founder of Bridgewater. While Mr Dalio expressed his skepticism about Bitcoin last November, he published an essay last month following another study that described cryptocurrency as “one hell of an invention.” He added that he was considering putting money in Bitcoin.

Other Bitcoin proponents include Jack Dorsey, the CEO of Twitter and Square. Square invested $ 50 million in Bitcoin late last year. And Mr. Dorsey, whose profile on Twitter is #bitcoin, has often tweeted about the properties of virtual currencies.

Last year Michael Saylor, the managing director of the software company Microstrategies, also added Bitcoin to his company’s balance sheet. It has since seen a tripling value to around $ 3 billion, according to the website. Mr Saylor has said he took the move because he believes the value of traditional currencies will decline over time, making Bitcoin’s scarcity more valuable.

“For anything someone has invested in as a store of value, it looks like it would be better to convert that into Bitcoin,” Saylor said in November.

Mr Musk has been talking to Mr Saylor on Twitter about emulating this strategy for the past few months. In a report filed on Monday, Tesla said it had bought $ 1.5 billion in Bitcoin to “maximize the return on our cash.”

Mr. Musk fueled the cryptocurrency fever through other tweets. Last month, Mr Musk followed Mr Dorsey by changing his Twitter profile to #bitcoin. He removed that description a few days ago, but posted other encouraging – and sometimes cryptic – news about virtual currencies.

He also brought up Dogecoin, a coin created in 2012 as a playful experiment to let people try the technology. Over the past month, Mr. Musk has gone from cryptic dogecoin jokes (“One word: Doge”) to semi-arduous arguments for why this could be taken seriously (“Doge seems inflationary but doesn’t make sense”). ).

Other celebrities then took up the Dogecoin thing with their own viral tweets. On Saturday, rapper Snoop Dogg responded to a tweet from Mr. Musk with a picture of himself as Snoop Doge.

Aside from people chasing the latest online joke, more and more are using cryptocurrencies for more serious purposes. Ethereum, the second most important 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 complicated types of calculations and transactions.

A popular application called Aave, which runs on Ethereum, enables cryptocurrency borrowing and borrowing, shifting interest payments directly between users without the involvement of a financial company.

According to the DefiPulse website, the system had over $ 5 million in outstanding loans on Monday. According to Coinbase, Ethereum also hit a high of $ 1,776 on Monday, up 134 percent since the start of the year.

“In 2017, people were only buying everything that was for sale,” Ms. Demirors said. “Now people know what they’re buying and they’re asking smart questions. That feels very different. “

Michael J. de la Merced and Ephrat Livni contributed to the coverage.

Comments are closed.