2021 Overview: A volatile year for Cryptocurrencies

2021 has proved to be an extremely volatile year for cryptocurrencies. The economic uncertainty and social anxiety induced by the pandemic kept cryptocurrency prices down throughout most of 2020, as investors sought safe-haven assets, such as gold. By the end of 2020 however, vaccination rollouts and signs of economic recovery once again turned investors’ attention towards the wilder cryptocurrency market. In addition, traders are considering digital assets as a good inflation hedge and, with signs of rising inflation in the US and Europe, they have been investing heavily in cryptos throughout 2021. The price of most major cryptocurrencies soared during the year, reaching all-time highs.

Bitcoin price was approximately at $28,000 at the start of the year but quickly spiked to an all-time high of approximately $60,000 by February, fueled by vaccination rollouts and by its endorsement by major companies, such as Tesla and Mastercard. By April, BTC price had almost reached $65,000 and Ethereum price was over $4,000 from approximately $1,000 at the start of the year. In May 2021 however, Bitcoin plunged 30% to $30,000 and Ethereum to $1,700, following the news of a ban of cryptocurrency transactions by China and a withdrawal of Tesla’s support by Elon Musk citing environmental reasons. A further regulatory crackdown on cryptocurrency operations by Chinese authorities in June drove the price of most major cryptos further down.

The launch of a bitcoin exchange-traded fund for the first time on Wall Street in October 2021 catapulted the currency’s price to over $65,000, surpassing its April peak. Other major cryptos also benefited from the launch of the Bitcoin futures ETF, as it was seen as an important milestone for the entire cryptocurrency industry, with Ethereum being considered the next in line for ETFs. BTC hit a record high of around $69,000 in early November and Ethereum peaked at over $4,000, fueled by signs of rising inflation. By early December however, the Bitcoin price dropped below $46,000, losing about $10,000, or more than 17%, in a 24-hour period and the price of Ethereum also dived to near $3,500. The crash in crypto prices was driven by major investors turning to safer assets following the emergence of the Omicron Covid variant. Throughout most of December, major cryptocurrencies moved sideways against the dollar and other major currencies, following the announcements of the BoE and the ECB for their asset purchasing programs. BTC closed at approximately $47,000 at the end of the year and ETH at $3,700.

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Written by:
Myrsini Giannouli

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