The largest cryptocurrency has had a particularly eventful 2021. Between the ban on mining in China, a few crashes and some great booms, what to remember about the period? We take stock in this article.
The price of Bitcoin (BTC) ends the year 2021 up significantly
The Bitcoin price is of course the most watched item to track the cryptocurrency. And this year, it has not silenced its reputation for volatility. After starting 2021 on a high note, it had hit an all-time high (ATH) in April, exceeding $65,000 for the first time.
However, this fine performance was followed by one of the biggest crashes in its history in May, when BTC fell close to USD 30,000. Since then, the recovery has been more timid, with a few bumps in the road. At the end of the year, however, things accelerated: the Bitcoin price reached a new all-time high of over $68,500.
In the end, Bitcoin ended 2021 a little lower: it was trading this morning at $48,000. But the progression remains clear: it corresponds to +76.9% over the last twelve months. It is currently capitalised at more than $906 billion.
Mining: a hashrate that has recovered from the Chinese exodus
One of the biggest news stories of the year has been the gradual restriction of mining by the Chinese government, which went so far as to ban it last summer. China at one point accounted for up to 65% of the world’s hashrate, so the consequences were particularly impactful for the Bitcoin network as a whole.
In total, the average hashrate dropped by 53% in a few weeks, a direct consequence of the mining farm closures. At its lowest point, it was only 84 EH/s :
Bitcoin (BTC) hashrate growth in 2021 (Source: Glassnode)
Since then, the great migration of miners to new territories has taken place. The United States has become the country producing the most hashrate (35% last August). It is followed by Kazakhstan (21%), as well as Russia and Canada (11% each) :
Hashrate evolution by country until August 2021 (Source: CBECI)
Against all odds, the Bitcoin hashrate has recovered quickly from this upheaval, and at the end of the year it even reached new records. This is further proof of the incredible resilience of the Bitcoin network.
Bitcoin: Long-term investors dominate 2021
General public interest in Bitcoin and cryptocurrencies has been confirmed in 2021. Non-fungible tokens (NFTs) have entered the discussion, and record highs in major crypto currencies have attracted a new set of investors. Both old and new investors at this stage seem determined to hold on to their BTC for the long term.
At the end of the year, 74% of bitcoin supply is indeed stored in holders’ wallets for the long term, a similar share to the beginning of the year, when it was 72%:
Long/short holders and their profits (Source: Glassnode)
All this is confirmed by the cryptocurrency stocks on the exchange platforms. When these decline, it is universally seen as a sign that investors are moving their coins to cooler wallets, and thus not planning to trade them soon.
In 2021, the number of BTC stored on trading platforms fell by -2.6%, or 67,800 BTC. However, we should bear in mind that the Bitcoin price has risen over the period, which means that the USD price of these BTC is not the same as at the beginning of the year. All of this indicates that “hold” continues to dominate investor strategies.
What’s the outlook for 2022?
So that brings us to 2022. What is the outlook for Bitcoin? Will its price see the highs so hoped for by investors? It would take a crystal ball to say for sure, but most experts seem confident.
In mid-December, Bloomberg analysts estimated that Bitcoin was still on course to hit $100,000 by 2022, explaining:
“We expect broader adoption to prevail and outpace most issues, similar to the near 50% correction experienced in 2021. […] Bitcoin appears to be on a trajectory towards $100,000. We see Bitcoin heading into 2022 with a bull market that has taken a break, and has been renewed.”
This psychological threshold of 100 000 dollars seems to be shared by other analysts… Even if some are more cautious. JPMorgan, for example, has set a price target of $73,000 for 2022, even though it envisages a record $146,000 in the longer term.
What is certain is that BTC has begun to attract the attention of investors looking for a safe haven as fears of sustained inflation weigh on the dollar. What some call “digital gold” could therefore continue to be a viable alternative in 2022.
