Bitcoin surpassed a $1 trillion market valuation for the first time on Friday, adding to a year of record growth.
In March 2020, a single bitcoin was valued at less than $5,000, but nearly a year later, the cryptocurrency has skyrocketed more than 900%, trading above $50,000 since Wednesday. That surge has been fueled by increased mainstream attention and big institutional market movers — when Bitcoin enthusiast Elon Musk’s Tesla disclosed earlier this month that it had invested $1.5 billion in the cryptocurrency, the value surged nearly 9% in a matter of hours.
Breaking: Bitcoin surges to new all-time high amid news of Tesla investment https://t.co/wFgMypwnsB pic.twitter.com/13fSWgTF1i
— Bloomberg Markets (@markets) February 8, 2021
And on Thursday, North America’s first bitcoin exchange-traded fund began trading on Canada’s Toronto Stock Exchange, notching roughly $165 million in trading activity on its first day.
Bitcoin advocates such as Michael Saylor, CEO of business intelligence company MicroStrategy, argue that as cryptocurrencies continue to enter the mainstream, Bitcoin will transition from a speculative investment to a “safe-haven asset.” Cryptocurrency exchange Gemini co-founder Tyler Winklevoss once said Bitcoin had the potential to sustain valuations as high as $500,000.
But skeptics see Bitcoin’s dramatic surge as one of the largest bubbles in market history, far outstripping the dot-com bubble of the early 2000s or the 2008 financial crisis.
“It’s surging because there’s massive amounts of manipulation,” said Nouriel Roubini, a professor at New York University’s Stern School of Business. “There are pump-and-dump schemes, spoofing. … I think it’s a bubble. Fundamentally, bitcoin is not a currency. It’s not a unit of account. It’s not a scalable means of payment. It’s not a stable store of value. … The Flintstones had a better monetary system than Bitcoin.”
Despite Bitcoin’s surge in value and mainstream attention, the cryptocurrency has so far failed to gain traction as a means of payment. A handful of companies accept bitcoin, notably Dish, Overstock, and Square, but the current regulatory environment treats bitcoin as an asset, not a currency — subjecting every transaction to a capital gains tax.
Many have also criticized Bitcoin’s scalability problem. The blockchain technology underlying every transaction only allows for roughly 4.6 transactions per second. A service like Visa, however, facilitates roughly 1,700 transactions per second, according to its claim of handling an average of 150 million transactions every day. Visa also claims that its network has the capacity for more than 24,000 transactions per second.
