Bitcoin is on the rise again.
The price of the cryptocurrency has surpassed $ 40,000, a figure it last reached on May 18. The increase marks a sharp reversal from Bitcoin’s recent collapse. After hitting an all-time high in April, the price of the cryptocurrency had fallen. But the rise in prices over the weekend could have stopped this decline.
At 11:56 p.m. UTC on Tuesday, the cryptocurrency changed hands at $ 40,343.92, an increase of about 2% in price from the previous day. It is up 37.5% since the start of this year.
Why has the price of Bitcoin increased?
Bitcoin’s rise began early Sunday when it was trading at $ 35,000. On Monday, the cryptocurrency recorded a 17% increase in price to cross $ 40,000. According to reports, two developments contributed to the latest Bitcoin price hike.
The first was a tweet from Tesla CEO Elon Musk saying that due to the energy consumption and environmental damage associated with Bitcoin, he would no longer allow the purchase of Teslas with the cryptocurrency. Bitcoin is estimated to use an amount of electricity roughly equal to that of the entire country of Argentina. Musk again used the social media platform’s megaphone on Sunday morning to partially reverse the course.
Musk tweeted that his company could resume authorization of Bitcoin transactions if there is “confirmation of reasonable (around 50%) use of clean energy by miners with a positive future trend.” According to reports, buyers have headed to crypto markets to buy Bitcoin after his tweet.
On Monday morning, hedge fund manager Paul Tudor Jones further accelerated the rise in cryptocurrency prices. Jones, who has invested 2% of his net assets in Bitcoin, said he views cryptocurrency as a “great diversifier.” âEveryone asks me what to do with my Bitcoin. The only thing I’m sure is I want 5% gold, 5% bitcoin, 5% cash, 5% commodity, âhe told CNBC.
Tudor Jones is among a growing number of institutional investors and hedge fund owners who are moving away from traditional financial instruments and turning to Bitcoin. In recent times, cryptocurrency enthusiasts have included investment titans such as Stanley Druckenmiller, Ray Dalio, and BlackRock’s Larry Fink.
Their positive reviews of Bitcoin have been complemented by an expanded array of crypto offerings by investment firms. For example, State Street recently launched a new division that will offer services related to decentralized finance and the digital economy. Leading investment bank Goldman Sachs offers Bitcoin futures exposures to its clients.
Bitcoin’s underlying problems remain
While these developments provide much-needed liquidity to its ecosystem, cryptocurrency remains a combustible asset subject to huge price swings over short periods of time. This year alone, the price of cryptocurrency has crossed a wide area between a record high of over $ 63,000 and a low of less than $ 32,000 over a two-month period.
Bitcoin’s underlying issues – from high power consumption for mining Bitcoin to a trading ecosystem dominated by a few big players like Tesla – also persist. The regulatory overhang on the price of cryptocurrency also remains. Countries around the world, including China and Iran, are toughening their positions and cracking down on crypto mining and trading.
In the United States, the Chairman of the Securities and Exchange Commission (SEC) Gary Gensler recently warned investors against the Bitcoin markets. âInvestors should be aware – I say this in my own voice – that the underlying Bitcoin cash markets do not have the robust oversight that you have in the stock market or derivatives markets,â a- he told participants during a conference.