Bitcoin faces regulatory scrutiny after a record rally

It was a difficult year from all points of view. But for Bitcoin, 2020 was a wonderful time.

The cryptocurrency nearly quadrupled, surpassing $ 20,000 for the first time since it recorded record after record. Bold people cheered him up as a cover for inflation in an era of unprecedented breadth of the central bank. Wall Street veterans from Paul Tudor Jones to Stanley Druckenmiller blessed him as an alternative asset, adding to the rally. And companies like MicroStrategy Inc. and Square Inc. they moved their cash reserves into encryption in search of better returns than interest rates close to zero.

Although none of these reasons for buying Bitcoin behave with its origins as an alternative to fiat currencies, they indicate a growing acceptance of crypto as its own asset class. And this makes the fan-like community take another round of victory in search of legitimacy.

“What’s happening now – and happening faster than anyone could imagine – is that Bitcoin is moving from a marginal esoteric asset to the mainstream,” said Matt Hougan, Bitwise Asset Management’s chief investment officer. “If it becomes mainstream, there is so much money on the sidelines that it will have to come in and establish a position that will leave me very optimistic for 2021.”

But with Bitcoin gaining more attention, it could gain even more control from regulators, says Guy Hirsch, general manager for the United States at the eToro online trading platform. “Despite this meteoric rise, there are storm clouds on the horizon,” he said, including the consequences of several last-minute actions of the outgoing Trump administration, among others.

Adherents say that in some ways, the year devastated by the pandemic has proven to be the perfect environment for digital currency. Warnings about global central banks printing money – some of which have begun to reveal their own interests in digital assets – have raised fears of possible inflation, while interest rates have fallen to minimum levels. This has led some investors to look for returns and hedge against cryptocurrencies, pushing the price above $ 28,000 from about $ 7,200 in early January.

Predicting where it will go is a full-blown exercise. Many left the coin dead after the 2017 rally resulted in an accident the following year, a period of time sometimes called “crypto winter. “But it has grown by more than 300% in 2020 and many investors say they could continue to earn next year. A survey conducted by Deutsche Bank found that most consider it over with 2021 higher, with 41% of participants projecting a target of between $ 20,000 and $ 49,999 and 12% seeing it exceed $ 100,000, according to Jim Reid, a company strategist. .

Before: The Treasury proposes reductions in virtual currency transfers

What’s on the radar? For Meltem Demirors, strategy director of digital asset manager CoinShares, there are some concerns about what the Joe Biden administration might mean for the cryptographic space.

“Overall, I think I’ve had challenges with demons – they prefer more regulation, more oversight,” Demirors said. “I’m a little worried about the way things are going,” especially with regard to antitrust lawsuits and the erosion of internet privacy. However, the industry has several allies, said Demirors, including Patrick McHenry of North Carolina and Warren Davidson of Ohio, who he says have advocated maintaining consumer financial privacy.

In the future, many strategists and investors say the industry could see more control and stricter regulation with Biden in the White House.

Much will, of course, depend on who holds the key positions in the administration. Janet Yellen, that was nominated to serve as secretary of the treasury in Biden’s administration, in recent years has warned investors about Bitcoin, saying it is an “extremely speculative asset” and “not a stable stock of value”. One representative did not immediately return a request for comment.