They have been writing obituaries for cryptocurrencies for almost a decade now. But they refuse to die so easily. On the contrary, the whole crypto ecosystem is growing bigger by the day. During the last nine years or so, the total market cap of cryptocurrencies has gone up from $1.5 billion (in May 2013) to $1,668 billion (on 22 January 2022). Bitcoin prices during that period have risen from less than $200 a piece to over $35,000 as of 22 January 2022, reaching the peak levels of $68,000 in between.
Cryptos have acquired all the paraphernalia of a legitimate financial asset with dedicated exchanges, hedge funds and asset management companies. The US even has Bitcoin futures ETF trading on exchanges. In what many are calling financialisation of cryptos, some ‘banks’ in the US are even giving interest as high as 9% on Bitcoin deposits—all these amidst fear of an imminent government crackdown on the whole crypto ecosystem, globally.
So far, we have seen stray action taken by some countries against activities related to cryptos. But barring a few like China—which banned mining and trading cryptos, and conversion of legal tender into them—not many have taken a very clear stance against these private digital currencies. Regulators in different countries have been making discordant noises against these currencies, but none of them have been able to say with conviction how they are going to deal with the Frankenstein monster. In fact, they are not even sure if they should call it a monster at all.
So we are in a situation where the interest in them continues to grow despite the heart-stopping volatility in that market, and the ecosystem around them is getting more sophisticated. We have now reached a stage where large institutional money is being funnelled into the digital currency market through hedge funds and asset management companies, making it all the more difficult for governments to act in a decisive manner against them. The obituaries might still be written till some country comes up with a set of regulations, finally legitimising them. Who knows, with the Budget around, India could take the lead in legitimising cryptos by announcing tax rules for gains made on them.