New US administration could cast a keener eye above Bitcoin

It’s been a hardcore year by most accounts. But also for Bitcoin, 2020 offers been marvellous.

The cryptocurrency almost quadrupled, surpassing $20,000 for the first time as it notched record after record. The diehards cheered it as an inflation hedge within an era of unprecedented central lender largesse. Wall Road veterans from Paul Tudor Jones to Stanley Druckenmiller blessed it alternatively asset, increasing the rally. And companies like MicroStrategy and Square transferred funds reserves into crypto in search of better returns than near-zero rates of interest deliver.

While none of these reasons for buying Bitcoin align with its origins instead of fiat currencies, they do indicate an evergrowing acceptance of crypto as an asset class of its own. And which has the zealot-like network taking yet another victory lap within their quest for legitimacy.

“What’s happening now - and it’s happening faster than anyone could ever imagine - is that Bitcoin is definitely moving from a fringe esoteric asset to the mainstream,” explained Matt Hougan, chief purchase officer of Bitwise Asset Control. “If it’s heading mainstream, there is merely so much funds on the sidelines that is going to have to can be found in and establish a location that it leaves me incredibly bullish for 2021.”

But with Bitcoin capturing higher attention, it might also garner even more scrutiny from regulators, says Person Hirsch, managing director for the US at online trading platform eToro. “Despite this meteoric go up, there are several storm clouds coming,” he said, like the fallout from many last-minute activities by the outgoing Trump administration, among others.

Devotees tell you that in a few ways, the pandemic-ravaged calendar year proved an ideal environment for the digital coin. Warnings of rampant money-printing by global central banks - a few of which began to reveal their own interests in digital assets - sparked fears of eventual inflation, while interest rates dipped to rock-bottom level lows. That’s thrust some investors to chase returns and hedge with cryptocurrencies, pressing its price previous $28,000 from around $7,200 at the start of January.

Predicting where it will go is certainly a fraught working out. Many kept the coin for dead following its 2017 rally led to a crash the next time, a stretch of period sometimes known as the “crypto winter”. But it’s surged a lot more than 300 per cent in 2020 and several investors say it might continue steadily to gain next season. A Deutsche Bank study found a majority view it ending 2021 higher, with 41 % of individuals projecting a target between $20,000-$49,999 and 12 per cent discovering it crossing above $100,000, according to Jim Reid, a strategist at the firm.

What else is on the radar? To Meltem Demirors, chief technique officer at digital-asset supervisor CoinShares, there are a few concerns about what the incoming Joe Biden administration might signify for the crypto space.

“Generally, I think we have had challenges with the Dems - they prefer more regulation, extra oversight,” Ms Demirors said. “I am a bit concerned about the direction factors are trending”, specifically around antitrust lawsuits and an erosion in net privacy. Still, the industry has some allies, said Ms Demirors, incorporating North Carolina’s Patrick McHenry and Ohio’s Warren Davidson, who she says have been advocates for the preservation of consumer financial privacy.

Going forward, many strategists and traders say the industry could see even more scrutiny and tighter regulation with Mr Biden in the White House.

Of course, a whole lot will depend on who fills key positions within the administration. Janet Yellen, who’s been nominated to serve as Treasury secretary in Mr Biden’s administration, has in recent years cautioned traders over Bitcoin, declaring it was a “remarkably speculative asset” and “not really a stable store of value”. A representative didn’t right away return a demand seeking comment.

Meanwhile, Bloomberg reported that Gary Gensler could possibly be nominated to replace Jay Clayton in the US Securities and Exchange Commission. Mr Clayton’s exit from the regulator can be welcome news for crypto admirers who saw him have a hard line over the years, suing to halt original coin offerings, rejecting applications for Bitcoin exchange-traded cash and launching a last-minute lawsuit against Ripple Labs. Mr Gensler, who offered as a Commodity Futures Trading Commission chairman through the Obama administration, is a senior advisor to the MIT Media Lab Digital Currency Initiative and teaches about blockchain technology and digital currencies.

Regarding to eToro’s Mr Hirsch, there is uncertainty about how the Biden administration might approach cryptocurrencies, however the appointments are significant “because Yellen is definitely famously anti-crypto and Gensler is well known for being pro-crypto”.

“Without focusing on how authorities will seek to extra robustly regulate crypto in the coming years, it really is very difficult for the market segments to keep growing at the same rate they are actually, particularly if, as some fear, regulations targeted at curbing innovation instead of fostering it happen to be enacted,” said Hirsch. “Once again, clarity is the name of the game.”