LONDON (AFP) – The price of bitcoin hit record highs in 2021 thanks to support from traditional finance, but cryptocurrency specialists are struggling to predict next year’s outcome for the volatile sector.
Having more than trebled in value to USD60,000 between December 2020 and April, bitcoin has lost some shine to trade at under USD50,000 heading into the new year.
“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 executive director at cryptocurrency investment fund ARK36Loukas Lagoudis.
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 growing appetite for cryptocurrency.
The record high in April occurred with the stock market debut of cryptocurrency exchange Coinbase.
October’s peak above USD66,000 followed the launch of a bitcoin futures exchange-traded fund (ETF), or type of financial instrument, on the New York Stock Exchange.
Tesla boss Elon Musk helped the market rise – and fall – with controversial tweets about cryptocurrencies.
The move by El Salvador in September to make bitcoin a legal tender also made an impression.
But pressure has come from China’s crackdown on the trading and mining of cryptocurrencies, while the risk of wider regulatory action, from the likes of Europe and the United States (US), weighs on bitcoin.
“There is no certainty in crypto, never mind regulation,” said general counsel at digital assets exchange Bequant Huong Hauduc.
“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 following the 2008 global financial crisis, bitcoin initially promoted a libertarian ideal and aspired to overthrow traditional monetary and financial institutions such as central banks.
In more recent times, climate change watchers have shone a spotlight on the huge amount of electricity used to power computers required to unearth new bitcoin tokens.
