Bitcoin rose above $50,000 on Tuesday for the first time, adding steam to a rally fuelled by signs that the world`s biggest cryptocurrency is gaining acceptance among mainstream investors and companies.

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Bitcoin hit a record $50,603 and was last up 0.83% at $48,351. It has risen around 67% so far this year, with most of the gains coming after electric carmaker Tesla said it had bought $1.5 billion in bitcoin.

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DIGITAL GOLD?

Also boosting bitcoin are suggestions that its limited supply of 21 million could drive further gains for the virtual asset.

A narrative of bitcoin becoming "digital gold" has gained traction as investors predict looming inflation amid massive central bank and government stimulus to counter COVID-19.

St. Louis U.S. Federal Reserve President James Bullard told CNBC on Tuesday that bitcoin`s claim to be a gold rival would not threaten greenback dominance.

"Investors want a safe haven, they want a stable store value and then they want to conduct their investments in that currency," he said. "It`s very hard to get a private currency - it`s really more like gold - to play that role."

JPMorgan said in January that bitcoin emerged as a rival to gold and could trade as high as $146,000 if it becomes an established safe-haven.

U.S. business intelligence software firm MicroStrategy Inc, whose CEO is a strong bitcoin proponent, on Tuesday said it would issue $600 million in convertible notes to buy additional bitcoin.

Meanwhile, smaller cryptocurrency ethereum fell 2.42%, after earlier rising to $1,826, just shy of its record high price of $1,875.

With cryptocurrencies collectively worth about $1.5 trillion, some investors caution about the value of owning them.

"As an intangible asset with no yield or practical use, save for a few organisations who accept it as payment, it is really just demand (against a predictable supply) which determines its price," said Mazars` Lagarias.

"But whereas the price of bitcoin has risen to the skies, what value one gets from holding it in a long-term portfolio still remains subject of much debate."

(Reporting by Thyagaraju Adinarayan and Tom Wilson in London; additional reporting by Anna Irrera and Joice Alves in London, Susan Heavey in Washington and Karen Brettell in New York; editing by David Evans, Dan Grebler and Sam Holmes)

 

 

The story has been taken from a news agency