Bitcoin has hit a fresh historic high. Here's why experts believe it will grow more
Bitcoin has broken the US$50,000 ($64,600) barrier, a new historic high as the cryptocurrency gains legitimacy among institutional investors.
Powered by several announcements that Bitcoin was would be treated as verifiable currency – such as for buying one of Elon Musk's Teslas – the infamous digital currency is on a tear.
Even during the peak of Bitcoin's emergence into the mainstream consciousness in December 2017 it only reached a high of around US$25,700.
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So dramatic has the crypto's recent rise been that if you bought a single dollar of Bitcoin in early 2011 your investment would now be worth more than $100,000, adjusted for inflation.
Simon Peters, cryptoasset analyst at multi-asset investment platform eToro, predicts Bitcoin could reach as high as the US$70,000 mark.
"Bitcoin's incredible rise this year shows no sign of abating. This latest landmark shows how it now has to be considered a mainstream investment asset," Mr Peters told 9news.com.au.
"The fact that major multi-national corporations, from BNY Mellon to Mastercard, are queuing up to lend support to Bitcoin demonstrates the clout it now holds.
"Its buying power is only going to become greater as more big names jump on board."
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Mr Peters said Bitcoin's power was connected to the fact it is not inherently linked to any major nation or banking system.
"Ultimately, Bitcoin is disrupting the status quo, and capitalising on the waning power of the dollar," Mr Peters said.
"As retail investors look to hedge against inflation, and institutions look for avenues to help drive growth, there's no reason why $70,000 can't soon be the new normal.
"Although, realistically, the cryptoasset could aim higher based on its impressive 2021 performance thus far."
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Why is Bitcoin booming?
There are a number of reasons why Bitcoin is booming, but all of them circle back to one reason: legitimacy.
Once seen as the domain of cybercriminals and software engineers, Bitcoin is gaining legitimacy as an alternative currency that is not tied to any one nation state or government.
The biggest recent factor is the one-time world's richest man in Elon Musk.
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Earlier this year Mr Musk's auto company Tesla announced it would soon accept Bitcoin as payment for its cars, effectively legitimising the currency as a valid form of trade.
"Tesla ... has de-risked the acquisition of #bitcoin by public companies and accelerated the digital transformation of corporate balance sheets," MicroStrategy CEO Michael Saylor, a Bitcoin advocate, tweeted.
"Treasurers are now thinking about how to convert a non-performing asset into the best performing asset."
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There are a number of other reasons why Bitcoin is gaining ground among institutional investors.
Bitcoin has inbuilt scarcity of just 21 million coins, meaning once all the coins are "mined" they will simply continue to go up in value (if they are used, theoretically).
Much of it is about risk: Bitcoin is infamous for its volatility.
If a business accepts Bitcoin as a payment, there is a very real possibility that the same payment could be worth a dramatically different amount even weeks later.
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Explained: What is Bitcoin?
1. Bitcoin is a form of online cryptocurrency that allows money to be transferred electronically. It's decentralised, which means no-one regulates or controls it except for market demand.
2. It was created by a group (or a single person) of programmers under the pseudonym "Satoshi Nakamoto" in 2009.
3. Bitcoins are "mined" by computers that solve incredibly complex mathematical equations. Like coal or oil, there is a limited number of Bitcoins available to be mined, estimated to be in the ballpark of 21 million.
4. You cannot mine Bitcoin on your home computer, it requires specialised programs and hardware that have increased the difficulty of mining a Bitcoin.
5. Bitcoin experienced a dramatic explosion in value in late 2017, before it experienced one of the most catastrophic value crashes ever seen in currency.
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