Bitcoin Hits $50,000: What's Fueling the Rally?
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What is the main topic discussed in this episode?
Here's your money briefing for Wednesday, February 17th. I'm J.R. Whelan for The Wall Street Journal. Bitcoin is on a tear. The cryptocurrency traded above $50,000 for the first time yesterday. It's doubled in value in the past two months. But it's not just investors hoping to make some quick cash that's driving prices up. Bitcoin is also gaining some longer-term supporters.
We've seen a lot of companies that have started putting their faith in Bitcoin and saying, we're going to start holding a little bit of it. We've seen institutional investors and asset managers say, you know, Bitcoin's been around for more than 10 years now.
What is driving Bitcoin's surge past $50,000?
We think that it could actually have a use case in portfolios. And so we're going to get exposure to Bitcoin.
Coming up, our reporter Caitlin Ostroff will explain all the factors pushing the price of Bitcoin higher and whether this is anything like the recent rallies in stocks like GameStop. That's after the break.
Every day it seems that Bitcoin is reaching record territory, like Tuesday when it hit an intraday high of $50,000, capping a more than 70% rise so far this year alone. So what's fueling the rally, and what are the risks for individual investors who want to get in? Let's bring in our reporter Caitlin Ostroth for some answers. She's been writing about it. Caitlin, thanks for joining us.
Thanks for having me.
So even though Bitcoin is in the news quite a lot, so much about it remains a mystery to many people. So let's start with the basics.
Why does Bitcoin's limited supply matter for price movements?
What is Bitcoin?
Yeah, so Bitcoin is what's called a cryptocurrency. So the way that currencies usually work is you have the Federal Reserve that prints dollars, the European Central Bank that prints euros. And with Bitcoin, there is no government that's in charge of deciding how much Bitcoin gets distributed. So it's basically a bit of computer code
How do companies and institutional investors influence Bitcoin's rally?
that people have assigned value to. And there's a limited number that can be essentially discovered by people who go and look for Bitcoin. And so it's basically just meant to be a digital currency that isn't controlled by anyone.
Okay.
What does broader adoption by banks and asset managers signal about Bitcoin?
And then there's also the question of the value of the currency itself. It's not fixed. Can you just explain that?
All currencies change in value to some degree. If all of a sudden there's a massive demand for the British pound, you're going to have to pay more dollars to get it.
How did Tesla's $1.5 billion Bitcoin purchase affect the market?
But usually it doesn't change that much. It's pretty stable. With cryptocurrencies, because there's nothing really underpinning where its valuation should be. There's no interest rates that are set by central banks. It's not constantly being used by so many people in the global market that there's like trillions in circulation at one time. And so because of that, it gets prone to these massive swings in any direction. And so even though you have days where Bitcoin can go up $5,000, you also have days where it can lose 50% of its value.
Well, Bitcoin has gained an enormous amount of value in a short amount of time. What's causing this current rally?
Are the recent Bitcoin gains comparable to the GameStop volatility?
Yeah, so the current rally is really driven by, we've seen a lot of companies that have started putting their faith in Bitcoin and saying, we're going to start holding a little bit of it. We've seen institutional investors and asset managers say, you know, Bitcoin's been around for you know, more than 10 years now, we think that it could actually have a use case in portfolios. And so we're going to get exposure to Bitcoin if not buy it outright. And you've also had, you know, just trading platforms and also just general apps like Cash App say we're going to let people actually hold and use cryptocurrencies as well. And so you've seen the adoption of it kind of in a broad area of uses just become more and more common.
And now on the flip side, let's talk about the supply of Bitcoin. Is that playing a role in driving the rally as well?
The supply is finite. The only amount of Bitcoin that can ever exist is 21 million in the current design. And because of that, as it's gotten more valuable, as more people have wanted to buy Bitcoin, you've seen a lot of companies, a lot of platforms really try to step up efforts to what's called mine Bitcoin.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:42
2
What is driving Bitcoin's surge past $50,000?
0:42–1:33
3
Why does Bitcoin's limited supply matter for price movements?
1:33–1:55
4
How do companies and institutional investors influence Bitcoin's rally?
1:55–2:10
5
What does broader adoption by banks and asset managers signal about Bitcoin?
2:10–2:25
6
How did Tesla's $1.5 billion Bitcoin purchase affect the market?
2:25–3:01
7
Are the recent Bitcoin gains comparable to the GameStop volatility?
3:01–4:42
8
How can individual investors safely get exposure to Bitcoin?
4:42–9:00
Speakers
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