According to experts, Bitcoin may face regulatory oversight after the record-breaking surge
It’s been a tough year for all the accounts. But for Bitcoin, 2020 was a great moment.
The cryptocurrency nearly quadrupled, surpassing $20,000 (roughly Rs. 14.7 lakhs) for the first time to record after record. The Diehards cheered it up as an inflation shield in an age of unparalleled central bank scale. It was blessed as an alternate commodity by Wall Street veterans from Paul Tudor Jones to Stanley Druckenmiller, who contributed to the rally. Companies like MicroStrategy and Square switched cash savings to crypto in search of greater returns than near-zero interest rates offer.
Although none of these reasons for buying Bitcoin comport emerged as an alternative to fiat currencies, they contribute to the increasing recognition of crypto as an asset class of its own. And that’s how the zealot-like faction takes another victory lap in their search for legitimacy.
Matt Hougan, chief investment officer of Bitwise Asset Management said that what’s going on today, because it’s going on quicker than anybody might possibly believe, is that bitcoin is shifting from a fringe obscure commodity to a popular asset. He added that if it’s going to be mainstream, there’s only so much capital on the sidelines that it’s going to have to come in and create a role that makes me really bullish for 2021.
But with Bitcoin gaining further interest, it could also garner more scrutiny from regulators, says Guy Hirsch, managing director for the US at the eToro online trading site. “Despite this meteoric rise, there are some storm clouds on the horizon,” he said, including the fallout from a few last-minute decisions by the outgoing Trump administration, among others.
Devotees claim that, in several respects, the pandemic year proved to be the ideal setting for the digital coin. Warnings of rampant money-printing by global central banks, some of which have begun to expose their own investment in crypto currencies, have given rise to worries of imminent inflation, although interest rates have plunged. That pushes some investors to chase returns and hedge cryptocurrencies, driving their price past $28,000 from about $7,200 at the beginning of January.
Predicting where it’s headed is a noisy exercise. Several abandoned the coin for dead since their 2017 rally ended in a fall the next year, often referred to as the “Crypto Winter.” However, more than 300 per cent of the coin grew in 2020 and many investors claim it will begin to rise next year. According to Jim Reid, the firm’s economist, the Deutsche Bank survey showed that the majority saw the end of 2021 higher, with 41 per cent of participants predicting a target of between $20,000 (roughly Rs. 14.7 lakhs)-$49,999 (roughly Rs. 36.7 lakhs) and 12 per cent having a target of more than $100,000 approximately Rs. 74 lakhs.
What’s happening with the radar? Meltem Demirors, chief strategy officer for digital asset manager CoinShares, is worried about what the incoming Joe Biden administration could mean for crypto space.
Moving forward, several strategists and analysts say, the White House industry could see more attention and stricter control with Biden.
Of course, a lot will depend on who will hold crucial roles within the government. Janet Yellen, who has been nominated to serve as Secretary of the Treasury under Biden’s presidency, has warned investors over Bitcoin in recent years that it was a “highly speculative asset” and “not a stable store of value.”
Meanwhile, Bloomberg News announced that Gary Gensler may be nominated to succeed Jay Clayton on the US Securities and Exchange Commission. Clayton’s resignation from the regulator is good news for blockchain enthusiasts who have seen him take a stern stance over the years, suing to halt initial coin offerings, refusing applications for Bitcoin exchange-traded funds, and initiating a last-minute case against Ripple Laboratories.
Gensler, who worked as chairman of the Commodity Futures Trading Commission under the Obama administration, is a senior adviser to the MIT Media Lab Digital Currency Program and advises on blockchain technologies and digital currencies.
According to eToro’s Hirsch, there is confusion as to how the Biden administration will handle cryptocurrencies, but the appointments are noteworthy “because Yellen is famously anti-crypto and Gensler is known to be pro-crypto.”
Hirsch said that without understanding if the authorities will attempt to more robustly control crypto in the coming years, it is unlikely for markets to continue to develop at the same pace as they are now, particularly if, as some fear do, legislation aimed at curbing rather than promoting innovation are implemented.
-With the aid of Claire Ballentine, Katherine Greifeld, Ben Bain, Saleha Mohsin and Sarah Ponczek.
