Bitcoin Faces Regulatory Scrutiny After Record-Breaking Rally
(Bloomberg) - It's been a tough year in every way. But 2020 was a wonderful time for Bitcoin.
The cryptocurrency nearly quadrupled, exceeding $ 20,000 for the first time as it traded record after record. The Diehards hailed it as an inflation hedge in a time of unprecedented big bank size. Wall Street veterans from Paul Tudor Jones to Stanley Printmiller blessed it as an alternative asset and contributed to the rally. Companies like MicroStrategy Inc. and Square Inc. have converted cash reserves into crypto in order to generate better returns than near-zero interest rates.
None of these reasons for buying Bitcoin Comport, with its origins as an alternative to fiat currencies, indicate a growing acceptance of crypto as a separate asset class. And that drives the Zealot-like community to ride another round of victories in their pursuit of legitimacy.
"What is happening now - and it is happening faster than anyone can imagine - is that Bitcoin is transitioning from an esoteric fringe asset to mainstream," said Matt Hougan, chief investment officer of Bitwise Asset Management. "If it goes mainstream, so much money has to come in on the sidelines to establish a position that I'm very optimistic about 2021."
However, as Bitcoin is drawing more attention, it could also be subject to further scrutiny by regulators, says Guy Hirsch, managing director for the United States at the online trading platform eToro. "Despite this meteoric rise, there are some storm clouds on the horizon," he said, including the aftermath of several last-minute actions by the outgoing Trump administration.
Followers say the pandemic-ravaged year was in some ways the perfect setting for the digital coin. Global central banks' warnings of rampant money pressures - some of which have disclosed their own interests in digital assets - sparked fears of possible inflation as interest rates plummeted to lows. This has spurred some investors to pursue returns and hedge themselves with cryptocurrencies, pushing the price from around $ 7,200 in early January to $ 28,000.
Predicting where it will go is a difficult exercise. Many left the coin for dead after the 2017 rally crashed the following year, a period of time sometimes referred to as “crypto winter”. But it is up more than 300% in 2020, and many investors say it could continue to gain in the next year. A survey by Deutsche Bank found that the majority saw the end of 2021 higher. Forty-one percent of respondents predict a target between $ 20,000 and $ 49,999 and 12% will exceed the target above $ 100,000, according to Jim Reid, the company's strategist.
Before: Treasury suggests action against transfers in virtual currencies
What else is on the radar? For Meltem Demirors, chief strategy officer at digital asset manager CoinShares, there are some concerns about what the in-depth Joe Biden administration could mean for the crypto space.
"In general, I think we had challenges with the Dems - they prefer more regulation, more control," Demirors said. "I'm a bit concerned about the direction things are going," particularly antitrust lawsuits and an erosion of internet privacy. Still, the industry has some allies, said Demirors, including Patrick McHenry of North Carolina and Warren Davidson of Ohio, who are committed to protecting consumer financial privacy.
Going forward, many strategists and investors could say that with Biden in the White House, the industry could see closer scrutiny and tighter regulation.
Of course, a lot depends on who occupies key positions within the administration. Janet Yellen, who was nominated as Treasury Secretary in Biden's administration, has warned investors about Bitcoin in recent years, saying it is a "highly speculative asset" and "not a stable store of value". A representative did not immediately return a request for comment.
Meanwhile, Bloomberg News reported that Gary Gensler could be nominated to replace Jay Clayton with the US Securities and Exchange Commission. Clayton's exit from regulatory agency is welcome news for crypto fans who have taken a hard line over the years to stop early coin offerings, turn down requests for Bitcoin exchange-traded funds, and bring a last-minute lawsuit against Ripple Labs Inc.Gensler, who served as Chairman of the Commodity Futures Trading Commission during the Obama administration, is Senior Advisor to the Digital Currency Initiative of the MIT Media Lab, teaching about blockchain technology and digital currencies.
According to eToro's Hirsch, there is uncertainty about how the Biden administration will handle cryptocurrencies, but the appointments are noteworthy "because Yellen is known to be anti-crypto and Gensler is known to be pro-crypto."
“Without knowing how authorities will try to regulate crypto more strictly in the years to come, it will be difficult for markets to grow as much as they are now, especially if, as some fear, regulations are aimed at To curb innovations instead of promoting them, ”said Hirsch. "Once again, clarity is the name of the game."
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