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Bitcoin’s dream run expected to continue as price crosses $19,000

Bitcoin has become a strong alternate investment class, price may cross 1 crore mark

On the Money Cryptocurrencies and Taxes

Over the last few months, Bitcoin has surged handsomely on the Nifty and has had a healthy run with the price momentarily crossing $19,000 on November 17. This has been due to the increasing investment from institutional investors, investment banks and more importantly payment companies.

Post COVID-19, a sharp asset and commodity pricing increase rebound has taken place, fuelling a massive global stock rally. Bitcoin is now seen more as an asset than as a commodity, which has given rise to the emergence of alternative asset investments. Over the last one week, Bitcoin has broken its previous records.

“No one can predict how far a rally can go, so short-term speculation is very risky. However, there is one smart investment strategy that is cost averaging for the long term. Buy small amounts of Bitcoin daily or weekly, hold it long-term through the ups and downs, and stick to your buying plan for years, not months. It's like an SIP for Bitcoin. No one knows how far this rally will go but at some point, there is always a correction. Anyone who pretends to know more than this is fooling himself or others. Long-term prediction is easy, though. Bitcoin will continue to go up (with periodic corrections) and could easily hit 1 crore by 2030, as our CEO Rahul Pagidipati has predicted. Investors should plan in years, not weeks,” remarked Vikram Rangala, Chief Marketing Officer at ZebPay.

The likes of global fintech companies like Paypal have started accepting cryptocurrencies on its platforms; among investment banks, JP Morgan Chase adopted a blockchain-based interbank payment system through Stablecoins, which greatly boosted confidence among investors. This has been a positive trend for the Bitcoin dream run at the Nifty.

“That Bitcoin will emerge as an alternate investment class is already proven especially in the recent festive season where the demand for Bitcoin was quite strong. We have witnessed 150 per cent growth in volumes on a weekly basis on the Bitex platform. Hence this rally is no surprise at all. In fact we estimate it to continue for some time with minor corrections. Another factor that is contributing towards the bull run is also talks of positive regulation that are now being held across countries,” pointed out Monark Modi, Founder and CEO, Bitex

Of late, it has been observed that Bitcoin has always been a leader in the crypto space and this year the performance was exceptional at 140 percent growth year to date(YTD). The growth is largely attributed to Bitcoin’s design—in May 2020, a supply shock event took place in the form of the third halving, where the number of Bitcoins mined daily gets cut in half. In the previous two halvings too, Bitcoin and the overall crypto-market cap rose exponentially, and a similar trend is expected this time. This time, interest in Bitcoin is expected not only be from retail investors but also from institutional ones as well.

“When there is a movement in Bitcoin price, a similar movement is also witnessed in other top cryptocurrencies, for instance Ethereum also has been witnessing an upward trend since Q1 of the FY 2021. This is mainly because both Bitcoin and Ethereum have strong fundamentals. However, with respect to every previous run ups in Bitcoin and major top cryptocurrencies, we also witness a healthy correction and strong consolidation in the market. I believe this time too we will witness a similar trend to continue in the short term,” pointed out Sumit Gupta, Co-founder and CEO, CoinDCX. 

A few experts, however, feel that they have actually seen the all-time high of $20,000 in December 2017 and think that at that time the increase in price was more related to a fear of missing out (FOMO) for investors. Even so, it is expected that the Bitcoin dream run will be sustainable this time.

“This time there are more genuine reasons for the price increase like American hedge funds adding crypto assets to their balance sheet, PayPal allowing access to its millions of customers to buy and sell cryptos followed by an announcement from DBS bank that they will soon start providing trading services for crypto to their clients. It looks like the growth we are seeing now is more sustainable and the global recession and pandemic is fuelling it,” remarked Sathvik Vishwanath, CEO of Unocoin.

The move by payment and remittance platforms to accept Bitcoin and Crypto as a currency of monetary exchange can give a huge impetus to both the investor and crypto asset trading ecosystem.

“Many investors are looking at equity stocks and alternative asset investment options like Bitcoin and crypto. Global bonds are now attracting very low or negative interest rates which acts as a huge dis-incentive to investors. Investors must take care and must undertake all the due diligence and use the proper risk management techniques for investment in bitcoin and crypto. All must fully understand the risks related to these high return but high risk investments,” explains Sudin Baraokar, Global IT and Innovation Advisor.

Recently CoinDCX, the cryptocurrency exchange released a report which highlighted that 60 percent of the respondents earning below Rs 5 lakh per annum found it extremely challenging to invest in crypto owing to lack of easy and seamless options available. On the other hand, 68 percent of respondents earning above Rs 10 lakh per annum cited legal and regulatory clarity as a major concern for considering investments in crypto.

This survey that had more than 11,000 respondents showcased that 78 percent of investors in crypto had also invested in mutual funds earlier and 22 percent of investors in crypto had never invested in any new age investments, whereas 63 percent of respondents from the IT, finance and the education sector barring banking felt crypto is a good asset class to invest in. Further only 12 percent of the respondents from the banking sector felt regulation is the biggest challenge from crypto and stated the reason behind their reluctance to invest in this asset class.

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