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Bitcoin more than doubled by April and went on to hit record highs of nearly $69,000 in November before plunging to under $50,000 within the next month.
2021 has been an eventful year for Bitcoin. After starting off at under $30,000, the world's most popular cryptocurrency more than doubled by April and went on to hit record highs of nearly $69,000 in November before plunging to under $50,000 within the next month.
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From being adopted as a legal tender in El Salvador to facing a crackdown in China, and from being promoted as a hedge against inflation to the impending threat of regulatory restrictions or even a ban in some other countries, here are some of the key events that drove Bitcoin prices in 2021.
• Tesla announced a $1.5 billion Bitcoin purchase:
On February 8, electric car maker Tesla said it acquired $1.5 billion worth of Bitcoins and that the carmaker would soon begin accepting payments in Bitcoin as well. Following the announcement, Bitcoin prices spiked, ending the day 11 percent higher at $43,133 from $38,958 at the open.
• Business Intelligence firm MicroStrategy pumped $1 billion into Bitcoin: MicroStrategy, one of the most prominent backers of cryptocurrency, announced in February 2021 the purchase of 19,452 Bitcoins that translated into a $1.03 billion investment. At the time, its Bitcoin holdings were valued at $4.5 billion.
• Paypal launched 'Checkout with Crypto': On March 30, Paypal announced it has started allowing US customers to use cryptocurrency holdings to pay online merchants internationally. Soon after, Venmo said it is joining the long list of companies that recently began recognising and accepting cryptocurrencies.
• Square Inc., Fidelity, Coinbase formed The Crypto Council for Innovation: On April 6, Square Inc., Fidelity, and Coinbase announced the formation of a new trade group called The Crypto Council for Innovation. This body would serve as the industry's voice to lobby with policymakers, regulators, and people around the world on the benefits of digital currencies and related technologies.
In the same week, Goldman Sachs announced its decision to make Bitcoin funds available to its high-net-worth clients, spurring the institutional adoption of the virtual currency. The investment bank said it would assist its clients to invest in cryptocurrency, through a new Digital Assets Group within its private wealth management division.
• Tesla CEO Elon Musk tweeted about suspending the use of Bitcoin due to fossil fuel use: On May 13, Elon Musk announced Tesla would no longer allow customers to use bitcoin to purchase its vehicles citing concerns about the use of fossil fuel for bitcoin mining. Bitcoin prices tumbled 17 percent to their lowest point since the beginning of March. Its market cap fell from $2.43 trillion to $2.03 trillion.
• Elon Musk made another announcement: On June 13, exactly a month from the previous announcement to not use the Bitcoin for its vehicle purchase, Musk said Tesla would resume transactions with the cryptocurrency when mining is done with more clean energy. This update sent Bitcoin prices soaring above the $39,000 mark.
• China cracked down on crypto: In June, the People's Bank of China issued a statement that explicitly mentioned that it considered all crypto-related activity illegal. This pushed all crypto prices, including that of Bitcoin, off the cliff. China reasoned that it was trying to reduce the carbon footprint as Bitcoin mining wasn’t a green process.
• Global regulators called for tighter checks on cryptocurrencies: On July 21, financial watchdogs and central bankers urged for tighter regulations for the rapidly growing class of digital currencies causing a sell-off in Bitcoin and other cryptocurrencies.
• El-Salvador became the first country to make Bitcoin a legal tender: On September 7, El Salvador, the smallest country in Central America, officially announced the adoption of Bitcoin as a legal tender. This made Bitcoin an acceptable mode of payment for purchasing goods and availing services.
The official Bitcoin wallet 'Chivo' was launched shortly after midnight on September 7. However, the Chivo system failed the same day with transactions failing. This led price of Bitcoin to drop from $52,200 to $44,672 in just a few hours, per CoinMarketCap data.
• 10,000 Bitcoin ATMs installed globally: On September 17, the number of globally installed ATMs touched the 10,000 mark - a 167 percent jump year-on-year (YoY). This was a key development indicating the positive sentiment towards cryptocurrencies in 2021.
• The first Bitcoin ETF was launched: In October, eight years after the first filing of a Bitcoin ETF, the US SEC finally allowed its launch on the US Exchange. The ProShares Bitcoin Strategy ETF started trading on the exchange on October 19, triggering a price rally. The coin ended at around $66,878 on October 20 after starting at $61,788 in one of the strongest rallies witnessed on the charts at the time.
• Global crypto market cap rides on Bitcoin to scale $3 trillion: On November 10, Bitcoin investors rejoiced as it surged to a new record high of $68,530, taking the global crypto market cap above $3 trillion.
• Bitcoin hit an all-time high of $69,000: Continuing its rally, Bitcoin hit a fresh milestone on November 11 – this time, scaling the $69,000 mark. However, the party was short-lived. Traders began booking profits, leading to a nearly $7,000 drop, sending BTC below $63,000.
• The Taproot upgrade: Bitcoin's Taproot upgrade, the first update in four years, went live on November 14. This was aimed at boosting data privacy, reducing transaction costs, and unlocking the potential of smart contracts on the blockchain. The upgrade added scalability to the blockchain through the Lightning Network, a ‘layer 2’ protocol that builds sub-chains over the main blockchain. This technical upgrade put the Bitcoin blockchain back in contention with the second generation ethereum blockchain, which introduced smart contracts.
Some other latest developments that have dampened sentiment for the legacy coin include US President Joe Biden's new infrastructure law that aims to modify crypto tax provisions by amending the definition of a crypto broker in the Infrastructure Investment and Jobs Act., China's reiteration in September that cryptocurrencies are illegal, India's announcement that it will present a bill in the ongoing winter session of Parliament to consider a ban on private cryptos, among others.
Although smart contracts, decentralised apps, and non-fungible tokens (NFTs) are gathering steam, acceptance of the mainstream cryptocurrency rose among investors as well as exchanges this year. Despite a robust performance over the last year, experts believe Bitcoin will face significant challenges as it enters 2022 on the back foot. A lot depends on many variables, including China's stance on mining and the volatility created by the trading of crypto whales.
However, there are others who believe bitcoin's value will rise, given there are only a little over two million of the 21 million bitcoins left to be mined. in fact, some believe it could even reach $100,000, although the timeline is not clear.
"The most knowledgeable educators in the space are predicting $100,000 Bitcoin in Q1 2022 or sooner," Kate Waltman, a New York-based certified public accountant who specializes in crypto told Time. Others are hesitant to predict a number and a date. Investors should expect a 'pretty sustainable' rise in Bitcoin’s long-term value driven by organic market movement, with the $100,000 threshold in near-sight, predicted Jurrien Timmer, director of global macro at Fidelity Investments, last month.