Bitcoin’s price reached new highs in 2021 owing to backing from traditional banking, but cryptocurrency experts are unable to forecast the unpredictable sector’s conclusion for the coming year.
Bitcoin has lost some of its luster, trading at about $50,000 (approximately Rs. 37,12,584) heading into the new year, after more than trebling in value to $60,000 (roughly Rs. 44,55,079) between December 2020 and April.
“The present choppy and directionless price movement, along with the risk of more negative 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 traditional financial systems will be the major drivers of growth of the crypto industry” in 2022, he added.
The ascent of Bitcoin in 2021 coincided with Wall Street’s rising interest in cryptocurrencies. The launch of bitcoin exchange Coinbase on the stock market set a new high in April.
The debut 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 money in September also made an effect.
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 of 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 clarification 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 run 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 the time being, Bitcoin is the only game in town.
According to the specialized website CoinGecko, the cryptocurrency industry is valued $2.36 trillion, 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 necessary to operate as a truly global money,” according to analyst Frank Downing.