After reaching the US$20,000 mark in trade mid-December, Bitcoin hit a record US$28,599.99 in value on December 30 last year after catching the attention of bigger investors. The quadrupling of Bitcoin’s value has been a remarkable trend since March last year with people around the world opting for online cryptocurrency transactions instead of cash payments.
Apart from PayPal enabling the use of cryptocurrency for its accountholders, central banks around the world have also set up bank-backed digital units to facilitate the use of cryptocurrencies such as Bitcoin, leading to its meteoric rise as a payment and trading currency. Bitcoin has attracted the attention of big investors from the US and other parts of the world due to its potential of becoming a mainstream transactional currency and its inflation hedging quality in an unstable global market.
Seen as an alternative asset by financial advisors and as an alternate payment currency, Bitcoin is clocking in record-breaking rates of growth and many investing companies have converted their cash reserves into cryptocurrency to reap profits from the current financial trend. Financial advisors and market insiders explain that Bitcoin is moving from being an unconventional untapped form of asset to being accepted as a mainstream asset.
This trend will induce a healthy cashflow from the side lines, leading to a rise in share prices. Although Bitcoin promises of a new year of high growth in 2021, the rise in its valuation can also mean an increased level of scrutiny from regulators and state authorities. Insiders also anticipate any last-minute decisions of the outgoing Trump administration that can lead to an increased level of regulations on Bitcoin and other cryptocurrencies.
Stock market experts and cryptocurrency users explain that the backdrop of a pandemic-struck market was the perfect setting for a year of unprecedented growth for Bitcoin. As there were doubts regarding the unregulated printing of money by global banks and their self-interest in digital assets, investors started worrying about a possible inflation as interest rates touched an all-time low globally. Driven by those fears, they chose inflation-hedging cryptocurrencies to get better returns on their investment.
A similar rally was seen in 2017 when the prices of Bitcoin soared only to crash in 2018, making it a very unstable asset to invest in. However, the more than 300 per cent rise in Bitcoin prices this year is predicted to be more stable and persistent even in 2021. Many hope that the Bitcoin might touch a new high of nearly US$50,000 by the end of this year while there are others who have predicted it to reach US$100,000 by the end of the year.
However, the change of US leadership and President-Elect Joe Biden taking control of the country’s administration might raise some concerns for the cryptocurrency sector as the Democratic party is known to be pro-regulation and monitoring of the prices and the cryptocurrency industry expects an increase in regulations under the Biden Presidency.
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