The year 2018 was tumultuous for the cryptocurrency industry. The market leaders like Bitcoin dropped to as low as $3,400 in 2018, with other cryptocurrencies like Ethereum falling to $91 by the end of December 2018. However, the recovery began in 2019, followed by mania in 2020. The cryptocurrency market surprised the investors, as always, with the beginning of 2021.
The massive upward journey of cryptocurrency began when Elon Musk’s Tesla announced an investment of $1.5 billion in January 2021. The market went into a frenzy after the announcement, the price of Bitcoin rallied over 17% and reached a record high of $44,220. Tesla said that it is only parking its unused cash in the Bitcoin to maximise its returns and plans to start accepting it as a payment method for its products.
Tesla’s investment in Bitcoin became an overnight game-changer for the cryptocurrency market. The speculative mania continued with the mention of Dogecoin, a new cryptocurrency, as the people’s crypto by Elon Musk again. The value of Dogecoin rallied more than 800%, adding more wildness to the cryptocurrency mania.
The cryptocurrency industry’s surge was further fuelled in February 2021 when MasterCard jumped on the crypto bandwagon by announcing that it will start supporting certain digital currencies on its network. The move came after MasterCard noticed a lot of its customers using its cards to buy cryptocurrencies, specifically Bitcoin. Thus, the company decided to make it easier, more acceptable, and more secure for people to use digital currencies as modes of payment on its network. The announcement fed the rally in Bitcoin further, sending it up by 3% and surpassing $50,000 for the first time!
As a result of the surge in prices of Bitcoin and other cryptocurrencies, the price of stocks associated with blockchain and their underlying digital currencies has also experienced a global rally. For example, stocks of Marathon Patent Group, a US-based crypto miner, rose by more than 3,000% in the past few months. However, to the investors’ surprise, Chinese crypto stocks are left behind in the Bitcoin mania. Stocks of companies related to cryptocurrencies, including Brilliance Technology and Shenzhen Forms Syntron Information, have been seen to fall instead. The massive difference can be attributed to more stringent controls of China’s central bank on its cryptocurrency landscape.
However, despite experiencing over 400% rally in the Bitcoin and becoming the world’s most crowded trade, analysts believe that the rapid growth in prices is more like a speculative mania than a trend. Investors have also started getting worried about it being a market bubble and are getting discouraged from investing. Resultantly, the price of Bitcoin recently dipped by 7.5% to $43,764 after the massive surge to $48,000 on the back of Tesla’s investment.
Moreover, some countries like Nigeria are also threatened by the decentralised nature of cryptocurrencies. They find it impossible to control the movement of the digital currency and believe it to be the currency of terrorists, drug dealers, and illicit traders. The fear rose to such an extent that the Central Bank of Nigeria issued a directive in February 2021 to banks and financial institutions prohibiting dealing in cryptocurrencies.
Thus, there is a global debate around digital currencies and how they should be handled. On the one hand, they are the currencies of the future, giving hopes to the youth and other investors. On the other hand, the concerns around security and centralisation are pulling many authorities back from giving a free rein to cryptocurrencies and their usage. Therefore, the crypto prices surge may appear to be a boom for some, while it remains frenzy and mania for many.
The supporters of the Bitcoin and other cryptocurrencies believe that the market will remain bullish and investments will generate high returns. However, the prices must surpass $40,000 and reach at least $41,500 for investors to retain the interest in Bitcoin and not start investing their funds elsewhere. Therefore, it is advisable not to put all eggs in the crypto basket and diversify through other avenues, including UK investment ISA or USA Roth IRA Investment. These investment accounts will assist in tax-free growth of your money, flexibility, and diversification of funds away from cryptocurrencies.
