Bitcoin spikes as Elon Musk says you can use it to buy Teslas

Watch: You can now buy a Tesla with bitcoin

The price of bitcoin spiked on Wednesday morning after Elon Musk said the cryptocurrency could now be used to buy Tesla (TSLA) electric vehicles.

"You can now buy a Tesla with Bitcoin," Musk wrote on Twitter shortly after 7am UK time on Wednesday.

Billionaire Musk said bitcoin would be accepted in the United States and "will be retained as Bitcoin, not converted to fiat currency."

Bitcoin was up 3% against the dollar to $55,444.21 (BTC-USD) shortly after the tweet. Neil Wilson, chief market analyst at Markets.com, said there was a "discernible sustained rally after Musk tweeted".

Tesla announced last month it had invested $1.5bn (£1bn) into bitcoin, the world's biggest cryptocurrency. The company said at the time it was hoping to accept payment in bitcoins in the near future. The announcement sent the price of bitcoin surging. The investment has since drawn scrutiny over its environmental impact.

Bitcoin has rallied more than 400% over the last six months thanks to growing support from institutional investors and major tech players like Tesla. Square (SQ), Jack Dorsey's payments company, has invested over $200m in the cryptocurrency.

READ MORE: Tesla's bitcoin investment has carbon footprint of 1.8 million cars

The price surge has helped bitcoin repeatedly reach new all-time highs in recent months.

Not everyone is convinced, however. Billionaire investor Ray Dalio, the founder of the $150 billion hedge fund Bridgewater Associates — the world’s largest — has said there’s a “good probability” bitcoin could be outlawed.

Musk — who recently changed his official title at Tesla to "technoking" — has long been an advocate of digital currencies. As well as bitcoin, he has provided price support to meme crypto doge coin this year by tweeting about it.

Watch: What is bitcoin?