Bitcoin’s price reached new highs in 2021 thanks to supporting from traditional banking, but cryptocurrency experts are unable to forecast the volatile sector’s conclusion for the coming year.
Bitcoin has lost some of its luster, trading at under $50,000 heading into the new year, after more than trebling in value to $60,000 between December 2020 and April.
“The current choppy and directionless price movement, along with the risk of further downside pressure, has created a great deal of concern in the digital asset market,” said Loukas Lagoudis, executive director of cryptocurrency investment firm ARK36.
“Sustained acceptance of digital assets by institutional investors and deeper integration of digital assets into legacy financial systems will be the major drivers of growth of the crypto industry” 2022, he added.
There is no such thing as certainty in crypto.
The ascent of Bitcoin in 2021 coincided with Wall Street’s growing interest in cryptocurrencies. The debut of the bitcoin exchange Coinbase on the stock market set a new high in April.
The launch of a Bitcoin futures exchange-traded fund (ETF), or form of financial instrument, on the New York Stock Exchange in October pushed the price past $66,000.
With provocative statements about cryptocurrencies, Tesla CEO Elon Musk helped the market climb — and crash. El Salvador’s decision to declare Bitcoin legal tender in September also made an impression.
However, Bitcoin is under pressure from China’s crackdown on cryptocurrency trade and mining, as well as the threat of larger regulatory action from the likes of Europe and the United States.
“In crypto, there is no certainty, let alone regulation,” said Huong Hauduc, general counsel at digital asset exchange Bequant.
“However, one thing is certain: the voices asking for crypto regulation are becoming more stronger, whether it’s for greater consumer protection or just clarity of the laws for institutions.”
Bitcoin was created in the aftermath of the global financial crisis of 2008, with the goal of overthrowing established monetary and financial institutions such as central banks.
Climate change activists have recently focused attention on the massive amount of electricity necessary to power the computers required to mine new Bitcoin currencies.
According to several observers, Bitcoin will face more rivalry as it approaches 2022, particularly from its closest rival Ethereum.
Jack Dorsey, the co-founder and CEO of Twitter, announced his resignation from the social media network in November, allowing him to focus on his digital payments company, which is looking to expand into cryptocurrencies.
For now, Bitcoin remains the dominant player.
The cryptocurrency sector is valued at $2.36 trillion, according to the specialized site CoinGecko, with Bitcoin alone worth $900 billion.
When compared to Ethereum, “Bitcoin’s unwillingness to modify its design” is really “a feature that gives the stability and consistency required to serve as a true global money,” according to analyst Frank Downing.