LIVE: What to Know About Cryptocurrencies in 2021

(Jan. 26) Bitcoin investors are having a wild ride. The best-known cryptocurrency quadrupled in price in late 2020 -– a surge reminiscent of its heyday three years earlier, when it rocketed to nearly $20,000, then crashed and lost more than two-thirds of its value. Once seen as the province of nerds, libertarians and drug dealers, there’s still little sign it will evolve into a useful form of money for most transactions. Yet the latest bout of roller-coaster volatility comes as more big investors are speculating that Bitcoin will gain wider acceptance and shake up the financial world, maybe by filling the role of gold as a hedge against inflation better than gold can.

As global financial markets convulsed through the pandemic in 2020, there were a flurry of developments that suggested Bitcoin was taking more steps toward going mainstream. In October, global payments giant PayPal Holdings Ltd. started letting customers use it to purchase goods and services, and some big financial players have introduced funds that make it easier for investors to add crypto to their portfolios. At the same time, the flood of money pumped into the global financial system by the world’s central banks renewed a debate about whether such moves could spark a resurgence of inflation – generating more interest in both gold and Bitcoin, since both are scarce assets.

Each upswing energizes Bitcoin’s true believers and catches popular attention -– the total market value of all cryptocurrencies topped $1 trillion for the first time on Jan. 7. Hot financial technology startups such as Robinhood and Revolut have made crypto a key part of their trading and banking apps. Still, investing in crypto remains a risky and volatile prospect, as the instruments remain largely unregulated assets subject to the whims of a fickle market. Bitcoin’s advance around the start of 2021 has been so swift that it dwarfs all other boom cycles in financial assets over the past 50 years.

Prominent money managers such as Mike Novogratz and Alan Howard have invested hundreds of millions of dollars in Bitcoin and other cryptocurrencies. A survey Fidelity Investments conducted in 2020 found that 36% of institutional respondents held crypto in their portfolios. More than six out of 10 expressed interest in Bitcoin and other cryptocurrencies, up from fewer than half in 2019. To be sure, Bitcoin is still a thinly traded market, where so-called whales, controlling large quantities of coin, hold huge sway. Less than 2% of anonymous accounts that can be tracked on the coin’s digital ledger control 95% of the available supply, according to researcher Flipside Crypto. A whale’s exit -- a more likely event now that Bitcoin is the domain of not just believers but also pragmatic financiers -- can send ripples throughout the ecosystem.

Bitcoin’s fans argue its recent rally isn’t comparable to other euphoric stretches, as the asset has matured with the entry of institutional investors. Zero and negative yields on traditional assets such as government bonds are driving hedge funds to seek out alternatives, and there’s a fear of missing out as the coin rallied to record after record. While nay-sayers have long said that Bitcoin’s will inevitably collapse again, many have recently had to revise their thinking -- simply because enough people seem to believe in Bitcoin. There’s also more discussion of Bitcoin as a legitimate hedge against inflation risk and any weakness in the U.S. dollar.

---

Subscribe to our YouTube channel

Bloomberg Quicktake brings you live global news and original shows spanning business, technology, politics and culture. Make sense of the stories changing your business and your world.

To watch complete coverage on Bloomberg Quicktake 24/7, visit  or watch on Apple TV, Roku, Samsung Smart TV, Fire TV and Android TV on the Bloomberg app.

Connect with us on…

Breaking News on YouTube