The first three months of 2021 witnessed the influx of new investors who were mostly attracted by the sustained bullish run of the two largest cryptocurrencies in the market, Bitcoin (BTC) and Ethereum (ETH), according to a new report by Coindesk.
The price of bitcoin has been on a historic run since December when it wiped off the previous all-time high of $20000 set in 2017 and through the first quarter of 2020. Some of the price records it set in the first three months include $40000 and $60,000. It is currently selling at over $58,300.
Bitcoin also passed the $1 trillion market capitalisation reaching $1.1 trillion by the end of the quarter.
“This is significant as, for many institutional investors, an asset is only worth considering once it reaches a certain size. At $1 trillion, bitcoin is likely to attract attention from more large institutions, which in turn could enhance its appeal to smaller investors,” the report read.
ETH also set records in the first quarter of 2020. Like, BTC, ETH resigned the previous all-time record of $1,440 set in 2018 with a new milestone of over $2,000.
Read Also: WEEK AHEAD: More of same for naira, Bitcoin rally to continue
While the global price of the two cryptocurrencies set new records, in Nigeria the price rallies were in multiples due to the weakness of the local currencies and high inflation, according to experts at Luno. For example, when one BTC sold for $60,000 it was selling for over N41 million on local exchanges in Nigeria.
The regulatory decision to remove support for cryptocurrency services and accounts also affected the inflation of prices on the local exchanges. The ban, however, did not affect the demand for cryptocurrencies in the first quarter.
“That growth was before the ban as the price rallied more than 100 percent, the interest has not reduced as we still see decent sign-ups even with marketing activities grinding to a halt across platforms,” Owenize Odia, Country Manager, Luno ETF.
BTC and ETH also outperformed traditional assets such as stocks, bonds, and gold. The researchers at Coindesk highlighted the not-so-impressive growth of gold as a factor of the receding fear of the COVID-19 pandemic on the back of vaccines being rolled out. This is likely to be the case for cryptocurrencies, which they say have more advantages compared to gold.
Bitcoin and Ethereum price increases also rubbed off on other cryptocurrencies many of which have gone on bullish runs and are expected to also surpass their previous all-time highs.
Beyond peer influences, the BTC and ETH price rallies also attracted more institutional investors who had begun to grab headlines since the fourth quarter of 2020. Financial institutions such as Goldman Sachs announced it is relaunching its crypto trading desk and will start offering crypto exposure to its private wealth clients. BNY Mellon and Deutsche Bank will offer crypto custody. A handful of European private banks also started offering cryptocurrency services while BlackRock authorised two of its largest funds to invest in BTC futures.
The number of companies holding bitcoin as reserves also increased in the first quarter. Tesla acquired the most bitcoin worth $1.5 billion in February 2021. MicroStrategy increased its bitcoin holdings to $1 billion in February as well.
The Bitcoin network also got an upgrade known as Taproot which has many features that aim to improve user experience and growth potential including enhanced privacy; more functionality, more flexibility; and more throughput.
