Updated 30 Dec, 2021

Reeling in the Year: The 2021 Bitcoin Throwback

Reelin in the Year


Key Takeaways:

  • Bitcoin is on pace to finish the year with a 70% gain and an all-time high of $69,000
  • The year marks tremendous progress towards mainstream adoption and wider use

Bitcoin Adds $500 Billion to Its Valuation in 2021

Bitcoin, the world’s first and biggest cryptocurrency, had its most intense year in terms of global adoption, price acceleration, and major developments. Millions of newcomers piled into the orange coin, from retail traders to Wall Street mainstays like hedge funds and investment banks.

More than that, entire countries turned to bitcoin in hopes it will provide a bright outlook for their economies. Along the way, a new record-high was achieved and greeted by crypto circles around the world. In a nutshell, this was 2021 for Bitcoin.

More broadly, bitcoin endured strong volatility as it is looking to finish the year higher by about 70%. In other words, the flagship token has added more than $500 billion to its market valuation and is presently floating near the $50,000 threshold. How did this happen? Let’s dive into it and find out.

Tesla Splashes Out $1.5 Billion into Bitcoin

The year kicked off on a fairly upbeat note as the token reached a January high of $42,000 per coin. In February, Tesla CEO Elon Musk shook the corporate world as he announced the EV maker has bought bitcoin worth $1.5 billion. The big investment is still present on Tesla’s balance sheet. Moreover, it has grown in value and is now worth about $2.1 billion.

Besides Tesla holding bitcoin in its treasury, the car company said it will accept the cryptocurrency as payment for its electric cars. A few months later, in May, Elon Musk walked back this decision, citing the big environmental impact bitcoin mining has. To this end, Mr. Musk said Tesla will take bitcoin once there is a substantial transition to clean energy in bitcoin mining.

Still, Tesla’s BTC purchase in early February boosted bitcoin’s price to a record high of $44,000 per token. As we’ll see later, this high was broken several times since then.

Global Adoption Spikes as Major Banks and Funds Join In

The year continued with increased appetite from companies, banks, and funds looking to get exposure to bitcoin. This said, 2021 marked the arrival of the first Bitcoin exchange-traded fund (ETF). The Bitcoin Strategy ETF, packaged by ProShares, made its trading debut on Wall Street in late October. That was the time bitcoin reached another record high when the price shot up to $67,000.

The ProShares Bitcoin ETF was the second-biggest ETF launch on the US stock market with a first-day turnover of almost $1 billion. Moreover, several other bitcoin funds followed as Wall Street greeted the arrival of crypto to mainstream finance.

Also, major investment banks and funds saw skyrocketing interest from clients to own bitcoin. To this end, some big-name money managers got a piece of the crypto pie. They include Ray Dalio, the founder of Bridgewater, the world’s biggest hedge fund. In addition, Paul Tudor Jones, Stanley Druckenmiller, and George Soros are some other legendary traders who own bitcoin either personally or through their funds.

Crypto Share in Mainstream Finance is Growing

To get into specifics, the number of crypto-focused investment products worldwide more than doubled in 2021. It reached 80 from just 35 a year ago. Crypto-related assets under management peaked at $63 billion, compared to $24 billion in January 2021.

In that context, the cryptocurrency market is claiming an increasingly bigger share of mainstream finance around the world. To this end, one of the many reasons 2021 will be remembered for is the arrival of institutional money to the cryptocurrency market.

Looking ahead into 2022, expectations are that this trend will be maintained. More institutional investors are likely to join the red-hot digital asset space.

Regulations and Bitcoin: Mission Possible?

With 2021 in its final lap, regulators around the world became active in their pursuit to introduce certain rules over crypto. Countries like China and India took a hard line on Bitcoin as they made their push for their own centralized digital currency backed by the government.

The US, on the other hand, won the approval of crypto circles as financial watchdogs said they will not be banning bitcoin and cryptos. The US Securities and Exchange Commission, for example, is currently working to introduce a regulatory framework over crypto trading and investing.

Further, the US Federal Reserve presented an accommodative stance toward bitcoin. The Fed Chairman, Jerome Powell, said the central bank has no intention to ban digital assets. This said, the crypto community expects regulations in the US to allow bitcoin to continue on its upward trajectory and reach new heights.

Taproot Upgrade: A Stepping Stone to Bitcoin’s Growth

2021 also brought us a key milestone in bitcoin’s technological development – the Taproot upgrade. In more detail, the upgrade aimed to improve bitcoin’s network and its smart contracts.

The first major upgrade to bitcoin’s blockchain, the Taproot upgrade introduced lower transaction fees, better scalability, and improved privacy.

El Salvador Moves to Adopt BTC as Legal Tender

The year 2021 will stay in history as the year bitcoin became legal tender for the first time. El Salvador, led by bitcoin-friendly president Nayib Bukele, made bitcoin the national currency in September. The small Latin American country embraced bitcoin as its official legal tender right next to the US dollar. Now, Salvadorans can use the orange coin to pay for coffee, land, or car repairs.

Moreover, El Salvador’s president plans to build an entire bitcoin city. The area will be shaped like a circle to resemble a coin. It will also feature a giant Bitcoin symbol in its center. What’s more exciting, is the city will be powered by a volcano and there will be virtually no taxes.

To this end, the bitcoin experiment on a state-level is so far producing very satisfying results for a whole country.

Bitcoin Milestones: 2021 in Numbers

Since early January, the price of bitcoin has made 16 record highs to settle at its present all-time high of $69,000 set Nov. 10. Also, the original cryptocurrency has logged six months in the green over the year and is looking to finish in December with a decline of about 14%.

Further, the leading cryptocurrency has secured 31 weeks in positive territory with seven weeks as the longest uninterrupted weekly winning streak. As to gains and losses, bitcoin had its worst single-day drop on May 19 when the price slipped 31.5%. On the flip side, on May 24, the token logged its best day for the year with a gain of 18.6%.

Presently, bitcoin is on track to finish the year with a gain of 70% and a price gravitating towards $50,000 per coin.