Bitcoin’s Banner Year Ends with Optimism for 2022
Forget that Bitcoin is trying to break out of its December slump. There’s a lot to celebrate in 2021 for the world’s first digital currency and savvy traders are optimistic about the coming year.
Breakout, breakout, breakout
Bitcoin, which started the year at about $29,329, continued its pattern of ups and downs during 2021, but this year, the highs were even higher. BTC reached new all-time highs in February, April, and November.
“The first two were due to events involving Tesla and Coinbase, respectively,” Raynor de Best, an analyst for Statista explains. “Tesla’s announcement that it had acquired 1.5 billion U.S. dollars’ worth of the digital coin as well as the IPO of the U.S.’s biggest crypto fueled mass interest.”
The third ATH of almost $69,000 reached in November coincided with the launch of the first U.S. exchange traded fund of bitcoin futures, the ProShares Bitcoin Strategy ETF (BITO).
But the new high was quickly followed by a steep price drop as markets reacted to the news of continued inflation and yet another coronavirus variant, Omicron.
“Experts note that steep pullbacks are nothing unusual for bitcoin, citing this year’s retracements of 25% in September and 50% in May,” Forbes reported. “The cryptocurrency is still up 97% year-to-date and its volatility is often billed as a positive trait, as it removes leverage from the market by liquidating high-risk traders.”
Mining makes a swift shift after China bans the business
The Bitcoin industry saw a major shift in mining operations this year, beginning with China’s ban on mining operations. “China went from controlling up to two-thirds of all Bitcoin mining in the world in April to not contributing to the industry at all as of July 2021, according to data compiled by the University of Cambridge's Centre for Alternative Finance,” Fortune reports.
The U.S. is now the number one country for Bitcoin mining, according to the Centre’s statistics.
“Bitcoin withstood a nation-state attack of China actually banning mining, and the network shrugged it off,” Kevin Zhang of Foundry, told CNBC. The U.S. has a “huge appetite for growth, building infrastructure, and leveraging stranded power,” he said.
Bitcoin moves into mainstream markets
The launch of Bitcoin futures ETFs on the U.S. Chicago Mercantile Exchange (CME) and the New York Stock Exchange (NYSE) were thought to be signals from regulators that a spot Bitcoin ETF might soon follow. However, it won’t happen this year.
“The U.S. Securities and Exchange Commission vetoed two proposals to offer bitcoin exchange-traded funds, dealing a blow to market participants who had hoped the agency would green light the effort after approving futures-backed bitcoin funds in October,” Reuters reports this week.
While the U.S. remains cautious in its approach to spot-traded Bitcoin funds, other countries have opened traditional financial markets to the digital currency.
“ETFs backed by physically settled bitcoin are available in Europe, as well as Canada, where regulators approved those funds in February this year,” Markets Insider said. “In August, French regulators let asset manager Melanion Capital list a spot bitcoin ETF of its own.”
In November, the Australian Securities and Investments Commission gave the green light to Bitcoin and Ethereum ETFs.
Pundits remain divided on BTC’s 2022 outlook
The end of the year always brings a wide swath of crystal ball gazing and for Bitcoin, the pundits predictions vary as widely as BTCs price.
Will Bitcoin climb or crash?
“If I were an investor now I would think about coming out of bitcoin soon because its price will probably crash next year,” Carol Alexander, professor of finance at Sussex University, told CNBC. She cited that bitcoin “has no fundamental value” and serves as more of a “toy” than an investment.
Concern on the regulatory front is also fueling speculation about the future of Bitcoin. Recent hearings on the U.S. Capitol Hill with major crypto industry players and lawmakers indicate that regulation may come sooner in 2022.
And, while Bitcoin purists like to think that its future is not tied to the traditional markets, experts believe BTCs fortune are still linked to the fiat world.
"Renewed impetus from the Federal Reserve to take away the punch bowl, and declining bond yields may point to a macroeconomic environment in 2022 that favors top cryptocurrencies bitcoin and ethereum," said Mike McGlone. Bloomberg Intelligence senior commodity strategist Mike McGlone in a recent research note.
"Crypto assets showing divergent strength versus equities near the end of 2021 may portend continued digital-asset outperformance in 2022."
Joyce Pavia Hanson