It has been an interesting year so far for Bitcoin. The cryptocurrency started the year around $28,500, which is already astounding considering it started the previous year around $7,000. Since then, it has peaked close to $58,000 and currently trades around $50,000.
What could account for these new high price levels? With crypto it is always difficult to say, but the one interesting dynamic we have seen this year is a larger scale acceptance in the large, listed company dynamic. Probably the most well-known news item regarding this came out in the beginning of February when Tesla announced they had bought $1.5bn worth of Bitcoin. Not only that, but the company also said it would start accepting Bitcoin as a payment method for its products.
The payment solution company Square also purchased $170m worth of Bitcoin. Added to this are other interesting pieces of news like the Twitter CFO saying they are studying how to pay employees in Bitcoin and how to put Bitcoin on their balance sheet. Another big headline story is that the largest global custodian – The Bank of New York Mellon – said the company plans to offer cryptocurrency services. More left field, a Nigerian senator said Bitcoin has made the Nigerian currency useless and valueless.
But perhaps one of the most interesting moves has been from the business intelligence software company MicroStrategy, who started buying Bitcoin in August last year and added $1bn during February. What’s more interesting about MicroStrategy is that they are taking on debt in order to fund their Bitcoin purchases. Their most recent debt offering was at a 0% coupon rate. They are issuing debt, not paying interest, and buying Bitcoin. This is an interesting gamble. The company’s Bitcoin holdings are worth around $4bn and that’s on a market cap of $7bn.
In the end, these Bitcoin price moves could just be more a function of transitory increased demand from the corporate sector. Or is there more to it? Have these large-scale corporate purchases added significant validation to the whole crypto market? Time will tell.