Bitcoin and even Dogecoin, which started out as fun experiments, soared in value as billionaires, corporations and celebrities promoted the digital currency.
Bitcoin hit new highs above $ 47,000 on Monday, soaring more than 45 percent since the start of the year.
Other digital currencies – with names like Terra and Solana – have also risen sharply in value.
Even Dogecoin, a cryptocurrency that started out as a joke with the Shiba Inu dog always surprised by its symbol, has surged nearly 1,000 percent over the past week to set a record.
The rallies are a moment of euphoria for thousands of different versions of digital money, which years ago were thought to be nothing more than online Beanie Babies caught in a speculative bubble. While cryptocurrencies often go up and down together, the latest boom stands out for its size – for the first time ever, the value of all cryptocurrencies has skyrocketed above $ 1 trillion over the past month – as well as the number of people using digital tokens for practical purposes and the major players involved.
On Monday, the real reason for the protests was an announcement from Tesla, the electric car company run by Elon Musk, the world's richest man. Tesla said that they had bought $ 1.5 billion in Bitcoin and would start accepting Bitcoin payments, sparking a frenzy of interest.
But the momentum underlying the surge has slowly built up over the course of about a year. During that period, PayPal has joined forces with other consumer applications that allow its users to buy, hold and sell cryptocurrencies. Some of the biggest hedge fund operators in the world – such as Paul Tudor Jones and Stanley Druckenmiller – have also put money into new markets, a sign that they increasingly view cryptocurrencies as assets like gold.
“This is just a big change in sentiment,” said Meltem Demirors, chief strategy officer at CoinShares, a cryptocurrency asset manager. “We went from being mocked and mocked to being the richest people in the world who talked about it.”
The protests followed a recent frenzy over shares of video-game retailer GameStop, which was also fueled by social media memes and Mr joke tweets. Musk. Joshua Gans, a professor who studies innovation at the University of Toronto business school, said both run-ups featured a new generation of investors who already had a lot of time on their hands in the pandemic and had few attractive options for spending their money. As a result, they have become more interested in the investments discussed online, he said.
Buying and trading stocks and cryptocurrencies has also become simpler and more accessible, said Gans. Square and the Robinhood trading app has introduced cryptocurrency and stock trading over the past few years. Last year, PayPal also added cryptocurrency to its app, expanding its audience.
“People didn't have extra money before and free time to ‘learn' about trading,” says Gans. Now stocks and cryptocurrencies are “easier to ‘buy' than ever.”
Cryptocurrencies started appearing in 2009 after someone known as Satoshi Nakamoto – whose true identity was never revealed – released rules and software for Bitcoin. Virtual currency, which has no physical support, can be sent electronically from one user to another, anywhere in the world. Bitcoin is run by a decentralized network of computers that keeps track of all transactions, so it cannot be controlled by governments or companies.
Bitcoin was originally described as a way of paying for goods online. But the need for transactions to be executed through a decentralized system makes payments slow.
Over time, investors have become more interested in Bitcoin because it is not controlled by any government or company. The software that sets the rules for Bitcoin also allows only 21 million Bitcoins to ever be created, so it's a scarce resource.
These qualities have created a period of explosion and destruction for Bitcoin and other digital currencies. In 2017, after a rapid increase, the price of Bitcoin fell. But since the coronavirus pandemic, a powerful new group of investors and companies have entered the market.
They include hedge fund operators such as Mr. Tudor Jones and Mr. Druckenmiller, as well as Ray Dalio, founder of Bridgewater. While Mr. Dalio expressed his doubts about Bitcoin last November, he published an essay last month after further research that described cryptocurrency as “one of the most remarkable discoveries.” He added that he was considering putting money into Bitcoin.
Other Bitcoin supporters include Jack Dorsey, Twitter and Square's chief executive. Square invested $ 50 million in Bitcoin late last year. And Mr Dorsey, whose profile on Twitter is #bitcoin, tweet frequently about the quality of virtual currency.
Last year, Michael Saylor, chief executive of software company Microstrategies, also put cash on his company's balance sheet in Bitcoin. He has seen it triple in value to an estimated $ 3 billion, according to the Bitcointreasuries.org site. Mr. Saylor said he took that step because he believes the value of traditional currencies will fall over time, making the scarcity of Bitcoin more valuable.
Bitcoin was originally described as a way of paying for goods online. But the need to carry out transactions via a decentralized system makes payments slow.
Over time, investors have become more interested in Bitcoin because it is not controlled by any government or company. The software that sets the rules for Bitcoin also allows only 21 million Bitcoins to ever be created, so it's a scarce resource.
These qualities have created a period of explosion and collapse of Bitcoin and other digital currencies. In 2017, after a rapid increase, the price of Bitcoin went down. But since the Corona virus pandemic, a powerful new group of investors and companies have entered the market.
They include hedge fund operators such as Mr. Tudor Jones and Mr. Druckenmiller, as well as Ray Dalio, founder of Bridgewater. While Mr. Dalio expressed his doubts about Bitcoin last November, he published an essay last month after further research that described cryptocurrency as “one of the most extraordinary discoveries.” He added that he was considering putting money into Bitcoin.
He also talked about Dogecoin, a coin created in 2012 as a fun experiment to let people try the technology. For the past month, Mr. Musk has gone from posting cryptic jokes about Dogecoin (“One word: Doge”) to a semi-serious argument for why it could be taken seriously (“Doge seems inflationary, but not very meaningful”).
Other celebrities then discussed Dogecoin with their own viral tweets. On Saturday, rapper Snoop Dogg responded to a tweet from Mr Musk with a photo of himself as Snoop Doge.
Outside of the people chasing the latest online pranks, more are using cryptocurrency for more serious purposes. Ethereum, the second most valuable digital token, has given birth to applications that allow new types of financial transactions. Unlike Bitcoin, which only supports the storage and movement of money, Ethereum allows the use of computer networks for more complex types of computing and transactions.
One popular application running on Ethereum, called Aave, allows people to lend and borrow cryptocurrency, with interest payments moving directly between users without involving financial companies.
As of Monday, the system had more than $ 5 million in unpaid loans, according to the DefiPulse website. Ethereum also hit a high on Monday at $ 1,776, according to Coinbase, up 134 percent since the start of the year.
“Back in 2017 people only bought whatever was on sale,” said Demirors. “Now people know what they are buying and they are asking smart questions. This feels very different. “
By Nathaniel Popper : Edited by Dicetrue
