Here’s An Insight Into Bitcoin’s 2021 Fluctuations

For Bitcoin, the year 2021 was a mixture of everything. From the good to the bad and the ugly! The world’s largest cryptocurrency had it all. In 2021, the cryptocurrency had a new buzz and set new milestones but above all, it experienced extreme fluctuations that caused investors to lose, and gain, and lose then gain and lose again.

Bitcoin started the year trading at above $20,000 and ended the year trading at $46,306.45. This is impressive if you ask anyone but it is pertinent to know that the cryptocurrency hit an all-time high of $69,000 in 2021. There were many predictions for Bitcoin in 2021 and many of them didn’t forecast Bitcoin closing the year at less than $50,000.

Bitcoin started the year with adoption from companies like Tesla, PayPal, Apple Pay, etc., and no one envisaged that Bitcoin would have moments of downturns in 2021. A smooth, uptrending growth was all that was expected of Bitcoin. This was not what happened last year.

According to CoinMarketCap, the average price for Bitcoin between January and December 2021 are as follows: $35,755.17, $45,357.40, $53,399.48, $56, 288.88, $45,100.43, $35,094.45, $35798.26, $44,035.63, $46,320.69. $55,125.21, $61,179.70, and $52,621.92. Notice the trend of fall-and-rise in the average prices of Bitcoin between January and December. Between January and April, the price of Bitcoin soared amid Tesla’s adoption as a means of exchange for its electric vehicles. In May, Tesla pulled the brakes on Bitcoin and stopped accepting Bitcoin as payment for its vehicles. This was the month the decline first started and coupled with a number of other factors, the price of Bitcoin continued to drop and managed to stabilize again in November. Between May and November, Bitcoin experienced extreme price volatility. The cryptocurrency failed to meet some of the forecasts made for it when the year started.

Let’s take a look at some of the reasons for Bitcoin’s fluctuations last year.

Tesla’s Rejection of Bitcoin As A Means Of Payment

Like it or not, Elon Musk had quite some influence on how Bitcoin fared in 2021. The price of Bitcoin soared following his announcement that his electric vehicle company Tesla would start accepting Bitcoin as a means of payment. Eventually, the business magnate and billionaire announced that Tesla would have to put a stop to accepting Bitcoin as a means of payment out of environmental concerns on the mining process of Bitcoin. Bitcoin fell and this was the onset of what would be a period of fluctuation for Bitcoin.

Political Factors

It is widespread knowledge that many governments are against Bitcoin and have gone as far as banning the use of Bitcoin and its related operations in their countries. China for instance had the most turbulent crackdown on Bitcoin. The crackdown actions swept over $400 billion worth of cryptocurrency from the market. Eventually, Bitcoin became banned in China. In China, and many other countries where Bitcoin is banned, many crypto companies and businesses had to shut down.

In other countries where Bitcoin isn’t banned, there is the hurdle of stringent regulations that are hindering the smooth operation of crypto platforms and businesses, which in turn affects how Bitcoin fares.

Apart from China, the United States Securities and Exchange Commission (SEC) rejected a spot bitcoin exchange-traded fund (ETF), which would likely have seen billions poured into the crypto market. This would have been a big win for Bitcoin.

Government policies, stringent regulations and the ban of Bitcoin in some countries had a negative impact on the prices of Bitcoin last year.

The Demand And Supply Of Bitcoin

Unlike the demand for Bitcoin which is endless and continuous, the supply for Bitcoin is limited. Currently, about 90 percent of Bitcoin’s total stock has been mined. The prices of Bitcoin rises with increased demand from investors trying to lay their hands on the cryptocurrency.

In 2021, as a result of the aforementioned factors, the demand for Bitcoin began to fall. Many investors wanted to dispose of their holdings as they either could not use it in their location or out of fear that it would further lose value. This caused the price of Bitcoin to fall eventually and also contributed to Bitcoin’s fluctuation for 2021.

Mining Difficulties

In 2021, mining operation for Bitcoin became highly criticized. According to experts, mining activities of Bitcoin was detrimental to the environment. Apart from this, China which was a major mining hub for Bitcoin banned Bitcoin and mining activities. Mine farms shut down, and miners could not continue with mining activities in many areas. While some mine farms shut down completely, others moved to other countries, like the US, where mining operations are welcomed. The US became the top destination for miners. Miners have moved or are moving to the US for a number of obvious reasons. A handful of American states have some of the world’s cheapest energy prices. This alone is enough to entice any miner. Asides from this, the US flourishes with renewable power sources and is therefore not dependent on one or a few power sources. While one of the huge concerns as to Bitcoin mining remains the effect it has on the environment, mining activities by miners have begun to show positive effects on the environment and prevent wastage of resources. Some miners have started to harness nuclear energy. Others are leveraging stranded energy such as natural gas going to waste in oil fields across the state of Texas. These help to combat the effect of greenhouse emissions and at the same time provide a source of mining power for miners.

At the end of the day, the mining difficulties experienced in 2021, contributed to the price fluctuations experienced by Bitcoin in 2021.

          It’s a new year already and a new set of predictions have come up about Bitcoin. While there are a number of predictions that say Bitcoin will hit newer milestones in 2022, a prediction by University of Sussex finance professor Carol Alexander is rather a negative one about Bitcoin. She predicted Bitcoin tumbling to as low as $10,000 in 2022, wiping out the gains recorded in the past. Her prediction stands on the basis that Bitcoin has no value and has no backing. “If I were an investor now I would think about coming out of Bitcoin soon because its price will probably crash next year”, the University of Sussex professor said.

A lot could happen to Bitcoin this year. The price could either stabilize, reach newer milestones or crumble this year. But we’ll have to be patient to find out!

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