Bitcoin reached record highs, nearly approaching the $50,000 mark, a day after Tesla said it had bought $1.5bn (£1.1bn, €1.2bn) of the cryptocurrency and that it plans to accept the cryptocurrency as payment for its cars.

The most popular cryptocurrency rose to a peak of above $48,216 before falling back, but it remains about 25 per cent higher than a week ago and has gained 1,150 per cent from lows in March 2020.

Rival cryptocurrency Ethereum also reached a record high of $1,784.85.

Tesla CEO Elon Musk, who openly supports the use of cryptocurrencies, plans to accept Bitcoin as a payment for Tesla cars. Some analysts see this as a signal that Bitcoin could become a mainstream financial asset.

However, there was some criticism about the move with Tesla, a green car firm, investing in a currency that uses a lot of energy.

Production of the cryptocurrency, known as "Bitcoin mining", needs energy powered computer hardware and ever-greater amounts of processing power.

Bitcoin is already up 67 per cent this year, on top of a 300 per cent rally last year, as investors look for alternative assets to invest in as interest rates in many countries are at all time lows.

However, not all central banks are confident about the cryptocurrency. In October, Bank of England governor Andrew Bailey warned traders over Bitcoin's use as a payment method, saying it lacked "intrinsic value" unlike cash or gold.

But Bitcoin scepticism does not mean that central banks and regulators are completely against digital currencies.

For example, in China regulators are starting to embrace issuing their own digital currencies for everyday use. 

Most recently, local media have been reporting that Beijing will issue $1.55m worth of digital currency to residents that can be used during the Lunar New Year holiday starting this Thursday. 

FURTHER READING: Bitcoin price news: could BTC hit $50,000 after Tesla buys in?

FURTHER READING: Tesla buys Bitcoin worth $1.5bn and plans to accept crypto payments