SAN FRANCISCO – Bitcoin hit a new high of over $ 47,000 on Monday, up more than 45 percent year over year.
Other digital currencies – with names like Terra and Solana – also surged in value.
Even Dogecoin, a cryptocurrency that started out as a joke with a regular Shiba Inu dog that surprised by its emblem, jumped almost 1,000% last week to set a record.
The rally was an euphoric moment for thousands of different versions of the digital currency, which years ago had been scrapped less so than the online Beanie Babies caught in a speculative bubble. Although cryptocurrencies often rise and fall together, the latest rise stands out in its magnitude – for the first time, the value of all cryptocurrencies spiked above $ 1 trillion during the month. advance – as well as the number of people who are using digital tokens for practical purposes and key players who are participating.
On Monday, the obvious reason for the protest was an announcement from Tesla, the electric vehicle company run by Elon Musk, the world’s richest man. Tesla says it bought $ 1.5 billion in Bitcoin and will start accepting Bitcoin payments, sparking a frenetic interest.
But the underlying impetus for the spike has been slowly building up over about a year. During that time, PayPal was engaged in other consumer apps that let its users buy, hold, and sell cryptocurrencies. Some of the largest hedge fund operators in the world – like Paul Tudor Jones and Stanley Druckenmiller – have also introduced money into new markets, a sign that they increasingly see cryptocurrencies as an asset like gold. .
“It’s just a big change in sentiment,” said Meltem Demirors, Chief Strategy Officer at CoinShares, a crypto asset manager. “We went from being ridiculed and ridiculed to having the richest man in the world talk about it.”
The rally comes after a recent frenzy of video game retailer GameStop shares, which was also fueled by social media memes and Musk’s joking tweets. Joshua Gans, a professor of innovation research at the University of Toronto’s business school, says both startups have a new generation of investors who have had plenty of time to join the university. and there are few attractive options for spending their money. As a result, they become more interested in talked about investments online, he said.
Buying and trading stocks and cryptocurrencies has also become simpler and more accessible, Mr. Gans said. Square and trading app Robinhood have both introduced cryptocurrency and stock trading over the past few years. Last year, PayPal also added cryptocurrency to its app, expanding the audience.
“People don’t have excess money before and the time to ‘learn’ about trading,” said Mr Gans. Now stocks and cryptocurrencies are “easier to ‘buy’ than ever before.”
Cryptocurrencies began to emerge in 2009 after someone known as Satoshi Nakamoto – who was never truly identified – released rules and software for Bitcoin. Cryptocurrencies, without physical support, can be sent electronically from one user to another, anywhere in the world. Bitcoin is run by a decentralized network of computers that keeps track of all transactions, so it cannot be controlled by a government or a corporation.
Bitcoin was originally described as a way to pay for things online. But the demand for transactions running through a decentralized system has slowed down payments.
Over time, investors become more interested in Bitcoin as it is not controlled by any government or company. The software that sets the rules for Bitcoin also allows only 21 million Bitcoins to be created, so it’s a scarce resource.
Those qualities created boom and bust times for Bitcoin and other digital currencies. In 2017, after a rapid spike, the price of Bitcoin plunged. But since the coronavirus epidemic, a host of strong investors and companies have entered the market.
They have included hedge fund executives like Mr. Tudor Jones and Mr. Druckenmiller, as well as Ray Dalio, Bridgewater’s founder. While Mr. Dalio expressed skepticism about Bitcoin last November, he published an essay last month after delving deeper into describing cryptocurrencies as “a devilish invention”. He added that he is considering putting money in Bitcoin.
Other Bitcoin supporters include Jack Dorsey, 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 frequently tweeted about the quality of cryptocurrencies.
Last year, Michael Saylor, chief executive of software company Microstrategies, also converted the company’s balance sheet cash into Bitcoin. Since then, he has seen its value tripled to about $ 3 billion, according to Bitcointreasaries.org. Mr. Saylor said he made the move because he believes that the value of traditional currencies will decrease over time, making Bitcoin’s scarcity more valuable.
“For anything that people invest in as a store of value, it seems better to move it into Bitcoin,” said Mr Saylor in November.
Mr. Musk spoke to Mr. Saylor on Twitter in recent months on imitating that strategy. Then, in a filing on Monday, Tesla said it bought $ 1.5 billion in Bitcoin to “maximize our cash returns.”
Mr. Musk has caused a fever around cryptocurrencies through other tweets. Last month, 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 confusing – messages about cryptocurrencies.
He also talked about Dogecoin, a coin created in 2012 as a fun experiment for people to try out the technology. Over the past month, Musk has gone from posting puzzling jokes about Dogecoin (“One word: Doge”) to half serious argument for why it can be taken seriously (“Doge seems inflationary, but doesn’t make sense like that”).
Other famous people then cited Dogecoin with their own viral tweets. On Saturday, rapper Snoop Dogg responded to a tweet from Mr. Musk with a photo of him, Snoop Doge.
In addition to those pursuing the latest online pranks, many are using cryptocurrencies for more serious purposes. Ethereum, the second most valuable digital token, has created applications that enable new types of financial transactions. Unlike Bitcoin, which only supports the storage and movement of money, Ethereum allows the use of the computer network for more complex types of computation and transactions.
A popular application running on Ethereum, called Aave, allows people to lend and borrow cryptocurrency, with interest payments transferred directly between users, without the need for any financial firm. join.
According to the website DefiPulse, as of Monday, the system has more than $ 5 million in outstanding loans. Ethereum also hit a high on Monday of $ 1,776, according to Coinbase, up 134% since the start of the year.
“Back in 2017, people only bought whatever was sold,” Ms. Demirors said. “Now, people know what they’re buying and they’re asking smart questions. This feeling is very different ”.
Michael J. de la Merced and Ephrat Livni Contribution reports.