SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer media award, in Berlin. Tesla says it has invested more than $1 billion in Bitcoin and will accept the digital currency as payment for its electric vehicles. (Hannibal Hanschke/AP)

SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer media award, in Berlin. Tesla says it has invested more than $1 billion in Bitcoin and will accept the digital currency as payment for its electric vehicles. (Hannibal Hanschke/AP)

Cost of a single Bitcoin exceeds $50,000 for first time

Price up almost 200% in the last 3 months, Tesla plans to buy $1.5-billion in the cryptocurrency

The seemingly unstoppable rise of Bitcoin continued Tuesday with the cost of a single unit of the digital currency rising above $50,000 for the first time.

The same Bitcoin just one year ago would have cost you $10,000. The price is up almost 200% in the last three months alone.

Bitcoin is rallying as more companies signal the volatile digital currency could eventually gain widespread acceptance as a means of payment. The vast majority of those who have acquired Bitcoin have treated it as a commodity, like gold, with few places accepting it in exchange for goods or services.

Companies have been leery because of Bitcoin’s volatility and its use by parties who want to avoid the traditional banking system for a myriad of reasons. On Tuesday, the price crossed and recrossed the $50,000 barrier at least a half dozen times before 10 a.m.

Last Monday, however, the electric car company Tesla sent a tremor through the digital currency markets, saying that it was buying $1.5 billion in Bitcoin as part of a new investment strategy, and that it would soon be accepting Bitcoin in exchange for its cars.

Then Blue Ridge Bank of Charlottesville, Virginia, said that it would become the first commercial bank to provide access to Bitcoin at its branches. The regional bank said Wednesday that cardholders can purchase and redeem Bitcoin at 19 of its ATMs.

BNY Mellon, the oldest bank in the U.S., followed a day later, saying it would include digital currencies in the services it provides to clients. Mastercard said it would start supporting “select cryptocurrencies” on its network.

While most expect a slow evolution toward widespread usage of bitcoins as currency, Richard Lyons, a finance professor at the University of California at Berkeley, says it’s inevitable. Lyons predicts Bitcoin and other digital currencies “will become transactional currencies increasingly over the next five years. It’s not going to happen overnight,” he said.

Lee Reiners, who teaches fintech and cryptocurrency courses at Duke University School of Law, said BNY Mellon’s move makes sense because “there are now numerous high-net-worth individuals and investment funds embracing crypto as an asset class to be added to their portfolio.”

READ MORE: In bid to win market share, Tim Hortons modernizing drive-thrus, upgrading menu items

But Reiners believes companies will remain hesitant to accept Bitcoin for payment because of its volatility.

“If you were a merchant, why would you accept payment in an asset that could be worth 20% less a day after you receive it?,” Reiners said in an email.

Investors will have to grapple with that volatility as well. The price of Bitcoin has soared and dipped since its debut on the futures market in 2017. A year ago, Bitcoin sold for below $10,000. Those fluctuations, analysts warn, could wreak havoc on a company’s bottom line and deter investors.

Assuming Tesla bought Bitcoin at the volume-weighted average price of $34,445 in January, the company is sitting on a gain of about 38% with its investment. But in the regulatory announcement unveiling the investment, Tesla warned about the volatility of Bitcoin, its reliance on technology for use and lack of a centralized issuer, such as a government.

“While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed,” Tesla said in the filing.

“Tesla is going to have to be very careful and comprehensive in accounting for its Bitcoin investment on its books,” said Anthony Michael Sabino, a professor of law, at St. John’s University. “Like any other financial asset other than actual cash, it might fluctuate.”

There appears to be some reluctance among traditional companies regarding Bitcoin, at least as an investment vehicle.

During a recent conference call with investors, General Motors CEO Mary Barra said her company had no plans to invest in Bitcoin, but would continue to “monitor and evaluate” potential use of digital currency.

“If there’s strong customer demand for it in the future, there’s nothing that precludes us from doing that,” Barra said.

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Police have identified the vehicle involved in the Feb. 14 hit-and-run in Chemainus and are continuing to investigate. (Black Press Media files)
Police seize and identify suspect vehicle in fatal Chemainus hit-and-run

Investigation expected to be lengthy and involved

The Cowichan Women Against Violence Society is planning on opening a child and youth advocacy centre. (Robert Barron/Citizen)
Child and youth advocacy centre eyed for Cowichan

Cowichan Women Against Violence Society hopes to open centre later this year

CVRD to apply for a grant to improve a 4.85-kilometre section of the Cowichan Valley Trail near Shawnigan Lake. (File photo)
CVRD looks to improve section of Cowichan Valley Trail

District applies for $250,000 grant to widen, upgrade 4.8-kilometre section in Shawnigan Lake

Cowichan Valley writer Jennifer Manuel will headlining YakFest on March 1. (SUBMITTED PHOTO)
Cowichan Valley writer to headline next YakFest on March 1

YakFest is a B.C.-based monthly women’s event held online via Zoom

A boat caught fire in Ladysmith Harbour early on Saturday, Feb. 27. (Photo submitted)
Search underway for missing woman after boat catches fire in Ladysmith harbour

A large boat caught fire on the morning of Saturday, Feb. 27

Island Health chief medical officer Dr. Richard Stanwick receives a first dose of Pfizer vaccine, Dec. 22, 2020. (B.C. government)
COVID-19 vaccination set to start for B.C. seniors aged 80-plus

Long-term care residents protected by shots already given

Det. Sgt. Jim Callender. (Hamilton Police Service screenshot)
B.C. man dead, woman seriously injured after shooting in Hamilton, Ont.

The man was in the process of moving to the greater Toronto area, police say

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Wildlife advocate Gary Schroyen captured this picture of a one-year-old cougar in the Sooke Hills using a homemade trip camera. Vancouver Island is home to approximately 800 cougars, which makes up about a quarter of the total population in B.C. (Gary Schroyen photo)
Wildlife advocate Gary Schroyen captured this picture of a one-year-old cougar in the Sooke Hill using a homemade trip camera. Schroyen presents Animal Signs: The Essence of Animal Communication on Nov. 30. (Gary Schroyen photo)
Declining Vancouver Island cougar populations linked to wolves

Large carnivore specialist says human development still plays biggest role on cougar numbers

(Black Press file photo)
Child in critical condition, homicide investigators probe incident near Agassiz

The child was transported to hospital but is not expected to survive

Sewage plant in Lower Mainland, operated by Metro Vancouver. (Metro Vancouver screenshot)
‘Poop tracker’ launches as researchers test Lower Mainland sewage water for COVID-19

‘Studying the virus in wastewater allows researchers to look at an entire population…’

This poster, spreading misinformation regarding COVID-19 restrictions, has been popping up in communities across Vancouver Island.
UPDATED: Poster popping up in Island communities falsely claiming COVID restrictions are over

Unattributed poster claims COVID restrictions ended March 1; Island Health responds

(Pxhere)
Compensation fund opens for B.C. students negatively affected by incorrect exam marks

Marks for 2019 provincial exams were incorrectly tabulated

Most Read