Bitcoin (CRYPTO: BTC) reached an unprecedented milestone for a cryptocurrency on Friday morning. The price of Bitcoin tokens topped $ 53,700 each, resulting in a market cap of over $ 1 trillion for Bitcoin. And like stocks related to Bitcoin Riot blockchain (NASDAQ: RIOT), Canaan (NASDAQ: CAN), and The9 Limited (NASDAQ: NCTY) As a result, they all rise 21%, 33% and 23% from noon EST today, respectively.
According to Coinbase, Bitcoin is up around 5% in the past 24 hours, hitting an all-time high of over $ 54,300. But there are other cryptocurrencies that are taking much bigger strides today. One is Binance coin (CRYPTO: BNB), an increase of around 49% at the time of this writing. And that oversized step is probably telling us something.
For the record, Riot Blockchain, Canaan and The9 have not reported any news that warranted shifting their stock prices so much. Canaan and The9 did not report anything. Riot Blockchain has been filed with the Securities and Exchange Commission (SEC) and reveals that insider Hannah Cho acquired 12,500 shares. On the surface, it seems bullish. Cho recently joined the board of directors, however, and those shares became free with the deal.
Hence, the real news today is what’s going on with Bitcoin. So far, we’ve seen growing adoption on Wall Street in 2021. Was a new adopter Teslawho have added $ 1.5 billion bitcoin tokens to their balance sheet. CEO Elon Musk used social media today to explain the move and essentially said it was a way to hedge against inflation.
Over time, there is a chance that more companies will see this problem the way Tesla does, resulting in higher demand for bitcoin when buying tokens (by the way, even private companies are buying bitcoin, including The Motley Fool). But not all companies add a small bitcoin position as a hedge. Some like MicroStrategy (NASDAQ: MSTR)seem to go all in.
MicroStrategy just issued over $ 1 billion worth of convertibles to buy more Bitcoin. On the one hand, it will buy less than Tesla bought. But Tesla is a $ 760 billion company. In contrast, MicroStrategy’s market cap is below $ 10 billion. In addition, the company already owns over 71,000 Bitcoin tokens valued at around $ 3.8 billion. Whatever happens to the price of Bitcoin in the future will therefore, in one way or another, have a direct impact on MicroStrategy stock.
Despite being just one company, MicroStrategy’s $ 1 billion demand for Bitcoin is enough to outperform the new token supply in the short term. This can lead to the price continuing to rise. And since the price goes up quickly, it can attract more buyers who are afraid of missing out. And that is exactly what can happen.
Let’s get back to the circle on Binance Coin. It is the native token of Binance – one of the largest cryptocurrency exchanges in the world. The demand for this coin is increasing as more people use Binance. Additionally, Binance’s PancakeSwap also appears to be creating greater demand for Binance Coin.
I’ll try not to stray too far into the weeds. Blockchain networks enable decentralized financing (DeFi) – nobody is responsible and there is no physical headquarters. There are only computer protocols that facilitate sharing. A popular decentralized exchange is Uniswap, which runs on the ether blockchain.
However, some complain that the fees for the Ethereum blockchain are too high. PancakeSwap works like Uniswap, but is based on the cheaper Binance blockchain. As a result, new users seem to be flooding Binance and switching to PancakeSwap in the past few days, which is driving up the price of Binance Coin.
The point is that the rising price of Bitcoin is getting a lot of attention. More and more people want to invest in cryptocurrency and cryptocurrency stocks. On the one hand, I personally think there are some good investments in the space. However, investors should always be cautious when approaching a new investment – the fear of missing out (FOMO) should never be the basis of your investment thesis.
Even if you have developed a good investment thesis, it is still important to keep a diversified portfolio as it spreads the risk. And cryptocurrencies undoubtedly involve risks.