Bitcoin ends its bang of 2021 with a December whimper. Cryptocurrency experts are confused about the future of bitcoin in 2022.
Bitcoin ended the year 2021 with a rocky finish. Bitcoin, which has the largest market value in cryptocurrencies, ended its December performance with a heavy loss. There was a drop of about 19 %, which is its largest monthly loss since May.
The 2021 December was the worst one since 2013. And its 60% advance in 2021 marked its smallest gain for an up year since 2015 when it climbed 36%.
On Friday, the price of bitcoin steeped into a low 3.5% before rebounding somewhat to trade at about $46,300 as of 5 p.m. in New York.
2021 was a flared up year for bitcoin. The token and the wider crypto world were interested very much in the bitcoin market potential and decided to spend 2021 pushing it further into the mainstream market. It also captured lots of attention from finance professionals, big companies and the public at large.
Bitcoin -The Speculative Currency
Cryptocurrency specialists who watch Bitcoin’s daily gyrations say that this behaviour of the currency is par for the course — bitcoin, which is the most famous name in the crypto world, is famous for its volatility and this year proved just as choppy as any other.
“We’re seeing a little more volatility,” Chris Gaffney, president of world markets at TIAA Bank, said in an interview. “It’s a speculative asset.”
Bitcoin started 2021 with a big shoot up and it suddenly began to climb new heights as more investors — especially big-name Wall Street institutions — became interested in it as a speculative asset or as a hedge against rising prices.
There were also lots of positive developments at the beginning of 2021, including the launch of the first U.S. exchange-traded fund tracking Bitcoin futures. This trading exchange helped propel it higher over the year. Globally, more than $20 billion was invested in crypto exchange-traded products through November, a record, according to ETFGI, a research and consulting firm. The firm said in a report that assets have grown by nearly 550% so far from $3.1 billion at the end of last year.
“This excitement factor that propelled bitcoin above $20,000 was like, ‘Oh my god, this isn’t just a bunch of kids. It’s real. Institutions are going to make strategic allocations to bitcoin because it’s a limited supply, it’s just high. level” said Michael Purves, chief executive and founder of Tallbacken Capital Advisors. “The next phase of this kind of awkward adolescence of bitcoin requires more than that.”
Bitcoin has had a hard time since November. It had hit an all-time high of nearly $69,000 in early November. Partly, cryptanalysts say, it’s being buffeted by concerns over greater regulatory compliance around the globe. But it’s also losing its place to other lesser-known newbies that are gaining attention as the hopeful players in the crypto ecosystem this year.
Among the cryptocurrencies, which have a fair amount of market share, Binance Coin posted the best return, adding roughly 1,300% in 2021.
Matt Maley, the chief market strategist for Miller Tabak + Co., says Bitcoin’s year-end volatility might be a result of investors jettisoning non-winning trades.
“Institutional investors like to pump up their large holdings at the end of the year and scale back (or in some cases, dump) their losers,” he wrote in a note this week. “Well, guess what? A lot of institutional players were late to the game on Bitcoin and other cryptos this year.”
Bitcoin’s fortunes for the year remain quite good, and it isn’t faring as poorly as it has during past drawdowns. Its 30% drop from its high is not as drastic as other swoons it’s experienced. The average decline from a record sits at around 46%, according to Bespoke Investment Group. Bitcoin’s mid-year pullback was even worse, with the coin down more than 50% at its low.
Hoping forward to the coming years, many investors are expecting prices to recover and eventually reach better places. The wild instability in the market indicates that it could go either way.
“We expect Bitcoin to continue to perform well. Tailwinds include sustained inflation and broader investor adoption from continued education as well as the broader macro environment,” wrote Martin Gaspar and Katherine Webb at CrossTower Research. “Investors are increasingly understanding the unique value-add of Bitcoin. As long as it continues humming, we believe the price will follow.”
Future of Bitcoin
The current choppiness in the price makes it difficult to predict the future of the coin next year. Created after the global economic crisis in 2008, bitcoin was introduced challenging traditional institutions and central banks. Bitcoins are at risk in 2022 not just because of its speculative nature, but also because of the competition it faces from the other crypto rivals such as Ethereum.