Cryptocurrencies could be in for another bullish year

Cryptocurrencies could be in for another bullish year

Bitcoin, the most popular cryptocurrency, has seen a nearly 300% rise in its value since the start of 2020

Credit: Reuters/Representative Image

The world’s most popular cryptocurrency Bitcoin crossed a record high of $28,599, making its gains close to 300 per cent in 2020, a surge that is indicative of the expanding demand for cryptocurrencies in the coming year.

Apart from delivering promising returns to its investors that were much more than what equities, debt instruments and metals could manage, cryptocurrency has now invited attention from major players in global finance. For instance, S&P Global may launch an index dedicated to cryptocurrency in 2021. Select investment bigwigs now offer crypto-related management services. Some portion of cross-border trade is also inviting crypto-based transactions. The currency is a big hit in the poker world and other gaming portals. 

Online transaction major PayPal also announced this year that it would allow account holders to use Bitcoin, one of the reasons Bitcoin’s value shot up from $5,000 at the beginning of the year to over $28,000 in the current time.

According to an analysis in Business Standard, there has been concern that this may be the initial stages of a bubble, but it has been argued that it is profitable to be part of a bubble in its beginning. And with big players stepping into the cryptocurrency game, the demand for it is only going to rise.

ZebPay, one of India’s largest cryptocurrency exchanges, said that Bitcoin could cross the Rs 1 crore-mark, which is over $136,000. Ethereum, another cryptocurrency, has risen 467 per cent since January and Ripple is up 52 per cent.

One of the noteworthy factors about cryptocurrency is that its value depends solely on its demand, and not rooted in any fundamentals. Their supply also cannot be altered, unlike government-issued currencies.

Because of its surge, governments across the world are putting in place frameworks for cryptocurrency transactions, like the US, Japan and Australia. India has not come up with a set of guidelines yet, but the government had put a ban on trading in cryptocurrencies in 2018, which was struck down by the Supreme Court in March 2020. It is yet to be seen what kind of regulatory measures will be taken for cryptocurrency transactions, now that it is being tapped by financial majors.