2021 has been an excellent year for the broader cryptocurrency market in terms of adoption and price action. The prices of most cryptocurrencies have soared massively since the start of the year despite the recent bearish trend.
In the last 52 weeks, Bitcoin’s price has risen by 72%. Bitcoin began 2021 trading around $32k per coin after it surpassed its 2017 all-time high of $20,000 towards the end of 2020. The leading cryptocurrency continued its 2020 rally in 2021 and quickly reached a new all-time high above $64k by April.
The rally came as the adoption of cryptocurrencies continued. The entry of more corporate entities into the crypto space helped push the price higher. Tesla began accepting Bitcoin as a means of payment for its electric vehicles; MicroStrategy continued to accumulate more bitcoins, and El Salvador was preparing a bill to make Bitcoin a legal tender.
The increase in adoption from institutional and retail investors pushed Bitcoin to a new all-time high of $64k. However, from May, Bitcoin went on to underperform till September. The poor performance was mostly caused by China’s ban on cryptocurrency-related activities.
It began with the various provinces in China banning cryptocurrency mining activities. China accounted for most of Bitcoin’s mining hash rate. Hence, the crypto mining ban resulted in Bitcoin mining’s hash rate declining massively. Thus, resulting in Bitcoin’s price losing more than 50% of its value and dropping below the $30k level in July.
The Chinese government didn’t stop there. The People’s Bank of China (PBoC) banned financial institutions and corporate entities from engaging in crypto-related transactions. Companies caught processing crypto-related transactions are sanctioned. This move effectively ended crypto trading activities in the Asian country. Thus, resulting in numerous cryptocurrency exchanges ending their services in China. Furthermore, companies such as Alibaba and Bitmain stopped selling crypto mining hardware to Chinese residents.
The attack by Elon Musk on Bitcoin and its massive energy usage also contributed to the bearish performance. Tesla discontinued its Bitcoin payment method due to environmental concerns about its energy usage for mining purposes.
Bitcoin’s price bounced back in September as miners moved to Europe and North America. The mining hash rate started to recover as the mining farms, and other individual miners found new homes in countries such as The United States, Kazakhstan, Iran, Canada, and several others.
El Salvador became the first country in the world to officially make Bitcoin a legal tender in September. Despite the warnings from global financial institutions like the IMF, El Salvador’s Bitcoin adoption is already yielding fruit.
Bitcoin slowly rose to reach a new all-time high at $69,044 in November, with the total cryptocurrency market cap reaching a new all-time high of $3 trillion. The increase in demand for Bitcoin by institutional investors and the entry of more corporate entities helped push the market higher.
However, Bitcoin is currently down by nearly 30% from its all-time high and is trading around $50k per coin at the moment.
Market experts are optimistic that 2022 will be a better year for Bitcoin. Vijay Ayyar, vice president of corporate development and global expansion at crypto exchange Luno, is confident that the United States will see the first spot Bitcoin exchange-traded fund (ETF) in 2022. He said, “The Bitcoin Futures ETF that launched this year has been widely regarded as not very retail-friendly given the high costs involved of rolling over contracts which amount to around 5-10%. Increasing pressure/evidence… points to a Bitcoin Spot ETF being approved in 2022 mainly because the market is now large and mature enough to support one.”
Grayscale has filed to convert its Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF, and many are optimistic that the SEC will approve at least one proposal in the coming year.
Kate Waltman, a New York-based certified public accountant who specializes in crypto, expects Bitcoin to reach $100,000 in the first quarter of 2022. “The most knowledgeable educators in the space are predicting $100,000 Bitcoin in Q1 2022 or sooner,” she said.