Bitcoin continues meteoric climb, briefly clearing US$50,000

• Bitcoin (BTC) price touched US$50,000 this week
• Market observers believe it may be ‘digital gold’
• However, many finance executives are not planning to invest in the coin this year, a survey showed

New records for BTC

The world’s largest cryptocurrency blew past the US$50,000 mark for the first time, as more mainstream investors flocked to its rally.

Bitcoin’s (BTC) price soared to an all-time peak of US$50,603 on Tuesday, up 76% in the year to date. The digital coin fell back to US$49,358 as at 09:44 SGT on Wednesday.

Most of its gains in recent weeks came on the heels of Tesla’s purchase of US$1.5 billion worth of Bitcoin. Elon Musk’s electric carmaker also said that it will accept BTC as payment.

Rabobank strategist Jane Foley said BTC’s rally was an indication of recent buoyant market confidence as well as news suggesting its growing acceptability among companies.

Major firms, including BlackRock, Mastercard, PayPal, BNY Mellon and Square, have backed cryptocurrencies in recent weeks.

However, investment banks continued to warn of a speculative bubble, with Bank of America saying in January that BTC’s price increase ‘blows the doors off prior bubbles’.

Is Bitcoin ‘digital gold’?

Some market observers have likened BTC to the yellow metal. JPMorgan said the cryptocurrency had emerged as a rival to gold and its price could surge to US$146,000 if it becomes an established safe-haven asset.

A narrative of the coin becoming ‘digital gold’ was gaining traction, Reuters reported, as investors sought safe havens amid expectations of inflation after massive economic stimulus to ease Covid-19’s impact.

Nasdaq-listed software maker MicroStrategy Inc announced on Tuesday that it was again adding to its BTC bet. The business intelligence giant has proposed to issue US$600 million in convertible notes to buy more of the virtual coin.

MicroStrategy also said it viewed its BTC stash as long-term holdings, and had no intention of regularly trading it, hedging, or signing derivative contracts.

Mazars chief economist George Lagarias cautioned that the prices of cryptocurrencies, which are intangible assets with little practical use, are mostly determined by demand against a predictable supply. What value one gets from holding BTC in a long-term portfolio is subject to ‘much debate’, he added.

Why are CFOs not keen on Bitcoin?

A poll showed that most finance executives, including chief financial officers (CFOs) are not planning to invest in the token as a corporate asset this year.

Research and advisory firm Gartner in February 2021 surveyed 77 finance executives, including 50 CFOs. A mere 5% of respondents intended to hold BTC on their company books this year, while 84% said they had no plans to ever buy it as an asset.

Over eight in 10 executives cited BTC’s price volatility as their greatest concern, as that posed a financial risk. The Gartner Finance practice’s chief of research, Alexander Bant, noted the ‘extreme’ difficulty in mitigating the coin’s price swings over the past five years.

Other concerns among the respondents included slow adoption of BTC as an accepted payment mode, regulatory challenges, cyber risks, and broader risk aversion, the findings showed.