Bitcoin, the world's largest cryptocurrency, plunged sharply on Monday, after soaring to record high of $34,800 (roughly Rs 25.4 lakh) on Sunday, as traders resorted to selling on grounds of volatility in highly leveraged futures markets.
The digital currency declined as much as 17 per cent in intra-day to slip below $30,000 levels, the biggest slump since March, before recovering to $31,227, down 7 per cent, as of 12:59 PM in London.
The fall in the cryptocurrency, however, was much smaller as compared to a 50 per cent rally in the month of December alone, when it breached $20,000 for the first time.
Bitcoin hit all-time high of $34,800 on January 3, within three weeks of crossing $20,000 (roughly Rs 14.6 lakh) for the first time on December 16, 2020, amid increased appetite for riskier assets. The cryptocurrency saw surge in demand from larger investors, such as companies and businesses, as it has become an attractive investment alternative owing to higher returns.
Given the growing demand for Bitcoin by large investors and companies, traders and investors expect Bitcoin to become a mainstream payment method. Besides, PayPal has announced that it would allow cryptocurrency in its wallets, which is likely to be followed by several other companies.
Bitcoin's recent rally was fuelled by massive demand from globally renowned investors and institutions, who put their weight behind this highly volatile digital currency amid unprecedented economic and geopolitical uncertainty caused by the COVID-19 pandemic. Launched in 2009, the price of one Bitcoin remained in the neighbourhood of a few dollars for its first few years, before surging to $19,783 in late-2017, to $20,000 levels in 2020 and further to $30,000 in the first month of 2021.
A global demand for Bitcoin is likely to provide important directions for India too, where it is yet to be regulated. In March 2020, things took a positive turn, and Bitcoin was declared completely legal in India after the Supreme Court in a ruling reversed the Reserve Bank of India (RBI) circular that restricted banks and financial institutions from providing services related to cryptocurrencies. However, the government is planning to bring a new law to formally end cryptocurrency trading in India.
Bitcoin is a digital currency that allows people to buy goods and services and exchange money without involving banks, credit card issuers or other third parties. It was introduced in 2008 by an unidentified group of programmers as a cryptocurrency as well as an electronic payment system. It is reportedly the first decentralised digital currency where peer-to-peer transactions take place without any intermediary.