2021 was a remarkable year for cryptocurrency in general, and the biggest gainer was Bitcoin as it surged to record highs breaking expectations and the element of doubt surrounding the legitimacy of cryptocurrencies.
However, the challenge for Bitcoin begins now, as the top cryptocurrency experts are struggling to predict what the new year holds in store for the cryptocurrency.
Having more than trebled in value to $60,000 between December 2020 and April, bitcoin has come down to trade at under $50,000 heading into 2022.
“The current choppy and directionless price action with a possibility of further pressure to the downside has introduced a lot of uncertainty to the digital asset market,” noted Loukas Lagoudis, executive director at cryptocurrency investment fund ARK36.
He added, however, that “sustained adoption of digital assets by institutional investors and their further integration into the legacy financial systems will be the main drivers of growth of the crypto space” during 2022.
Bitcoin’s rise in 2021 coincided with Wall Street’s increase of belief in cryptocurrencies.
The record high in April occurred with the stock market debut of cryptocurrency exchange Coinbase.
October’s peak above $66,000 followed the launch of a bitcoin futures exchange-traded fund (ETF), or type of financial instrument, on the New York Stock Exchange.
Tesla‘s CEO Elon Musk also played a rather instrumental role in helping the prices of cryptocurrencies to go through the roof, his tweets determine the rise and fall of the prices to a great extent.
The move by El Salvador in September to make bitcoin a legal tender also made an impression.
On the other hand, pressure comes from China, which has cracked down on the trading and mining of cryptocurrencies, while the rise of wider regulatory action, from the likes of Europe and the United States, weighs on bitcoin.
“There is no certainty in crypto, never mind regulation,” said Huong Hauduc, general counsel at digital assets exchange Bequant.
“However one thing is certain, the voices calling for crypto regulation, whether it be for tighter consumer protection or just clarity of the rules for institutions, are getting much louder.”
Created after the global economic meltdown of 2008, bitcoin initially promoted a libertarian ideal and aspired to overthrow traditional monetary and financial institutions such as central banks.
Bitcoin is at risk of increased competition entering 2022 as its closest competitor, Ethereum has gained a reputation as being a relatively stable cryptocurrency in comparison to bitcoin.
In November, Twitter co-founder and CEO Jack Dorsey left the social media platform to concentrate on his digital payments firm as it looks to expand into cryptocurrency.
Bitcoin is the dominant player in the entire crypto space for now.
As per specialized coin site CoinGecko, the cryptocurrency sector has a market value amounting to $2.36 trillion, with bitcoin worth a combined $900 billion.
For analyst Frank Downing, “bitcoin’s reluctance to evolve its design” compared to the likes of ethereum, is in fact “a feature that provides the stability and consistency required to serve as a true global money.”
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