A Case Study on Cryptocurrency Driven Euphoria in 2020-21

Abstract

Cryptocurrency is considered as the virtual currency which is protected by cryptography. It is safe and acts as medium of exchange. The ownership of individual coin remained stored in ledger which is held in computerised database. The adroit and efficient cryptography preserve transaction details, regulate creation of new coins and deals with transfer of ownership. The control of cryptocurrency is decentralised and doesn’t come under the purview of central bank financial system. Decentralised mechanism follows sophisticated blockchain technology. There are host of cryptocurrencies in the market such as Bitcoin, Ethereum, Litecoin, Libra which showed progressive journey in valuation despite dismal economic situation. When central banks were busy in quantitative easing, market got inundated with low interest rate based credit facility. Speculative transaction went high and financial institutions along with retail investors parked their investment in cryptocurrency. Due to supply constrain, cryptocurrency like gold acted as hedge against uncertainty. When majority of economies struggled with fiscal deficit and debt burden, cryptocurrency made a rapid stride and well-known bitcoin ended up with 200 percent hike in value till December end 2020.