Tesla investment fuels bitcoin rally even as experts see profit booking

Bitcoin prices on Tuesday surged past $48,000—marking a first—after American electric-car maker Tesla Inc said it has invested $1.5 billion in the digital asset. It is by far the biggest company yet to back the cryptocurrency platform.

Tesla revealed the position after its chief executive officer Elon Musk came out in support of bitcoin and a lesser-known cryptocurrency, dogecoin.

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The rally in bitcoin prices following the announcement helped the cryptocurrency surpass Tesla’s market capitalization of around $869 billion to touch $888 billion.

The world’s oldest cryptocurrency has moved within a wide range of $42,568.18-48,226.25 over the past 24 hours, and was trading at $46,166, up 7% around 7.30pm IST, according to data available with crypto-exchange WazirX.

“Investments from international hedge funds have continued to rise and Indian exchanges’ daily volumes have also gone up by at least 20%. This got hotter when Tesla announced that it bought bitcoin and will start accepting it for payments. This pushed up prices by 15% in less than a few hours,” said Sathvik Vishwanath, co-founder and chief executive officer, Unocoin.

Other major cryptocurrencies, such as ethereum, tether and ripple, were also trading up to 3% in the green. However, experts said the market might see some profit-taking.

“The inflow of money has significantly increased, and this has given the stability to prices, which were getting overpriced. Given that we are approaching the financial year-end next month, we can expect some consolidation and profit booking over the next few weeks the way we saw in November and December in developed counties for whom December is the financial year-end,” Vishwanath added.

Meanwhile, minister of state for finance Anurag Thakur on Tuesday told the Rajya Sabha that the bill on private cryptocurrencies is being firmed up and will be sent to the Cabinet soon for approval.

On 29 January, the government listed a bill in Lok Sabha to ban all private cryptocurrencies in India.