Bitcoin staged a powerful rally to start off 2021, punctuated by tweets from the billionaire Tesla founder Elon Musk that sent prices soaring for the joke token dogecoin.
The sharp price rise in BTC contributed to a $1.1 billion profit for Ruffer Investments, a U.K.-based investment management firm, in just five months.
As bitcoin soared in February, social media, particularly Twitter, appeared to take on an expanded role in cryptocurrency markets, with prices jumping in response to tweet after tweet.
A series of posts by Tesla CEO Elon Musk and then-Twitter CEO Jack Dorsey helped to push bitcoin higher from $40,000 in January to nearly $57,000 in February.
For example, Musk, ranked by Forbes as the world’s richest person, added the #Bitcoin hashtag to his Twitter profile, contributing to an immediate 11% BTC price rally.
Once again, bitcoin turned lower – dropping back to its 50-day moving price average of around $30,000.
“This is a watershed moment for the digital-asset industry, as it signifies a larger moment of credibility for a market that is maturing rapidly,” Hunter Merghart, head of U.S.
The initial trading price for the COIN stock, at $381, was an impressive 52% above the reference price of $250 a share published a day earlier by the Nasdaq.
It seemed like the fear, uncertainty and doubt – FUD, or crypto-speak for negative news – was coming all at once.
President Joe Biden was planning to roughly double the tax on capital gains or proceeds earned from selling assets – with provisions deemed unfriendly toward cryptocurrencies – to end hopes of a rally back toward bitcoin’s all-time high near $65,000.
“The U.S.
Warmer weather was coming in the Northern Hemisphere, and more coronavirus vaccines were getting distributed around the world, leading to a sunnier economic outlook.
Securities and Exchange Commission’s Office of Internet Enforcement, told CoinDesk’s Lyllah Ledesma in May that the bitcoin ESG concerns would certainly damp institutional investment in crypto.
News of the China ban sent bitcoin sharply lower, which left the price down roughly 50% from the April record near $65,000.
It also dawned on investors just how vulnerable cryptocurrencies were to regulatory risk.
“Last November we gained exposure to bitcoin.
But so, too, is the surge in excess liquidity generated by fiscal stimulus and ongoing quantitative easing.
In terms of the market reversal, it sure didn’t help that several crypto-market indicators were flashing signs of excessive buying activity in the month or so leading up to bitcoin’s April price peak.
Toward the end of May, the Tesla CEO tweeted that he spoke with bitcoin miners about using renewable energy resources.
The announcement on May 24 of the Bitcoin Mining Council, which banded together miners and large investors, including MicroStrategy CEO Michael Saylor, sent BTC immediately higher by almost 12%.
And then, over the course of July and August, bitcoin mostly traded sideways, establishing a new price range as some technical indicators suggested BTC’s price was oversold.
Around the start of the year, multiple altcoins began to outperform bitcoin, reflecting a strong appetite for risk among investors.
Even during the broad crypto market sell-off, altcoins began to account for a greater share of the total crypto universe – shrinking bitcoin’s “dominance” in the industry jargon.
The chart below shows bitcoin’s market capitalization relative to the total crypto market capitalization, known as the bitcoin dominance ratio.
The Bored Apes Yacht Club became the second-most popular NFT collection by total trade volume behind CryptoPunks, CoinDesk’s Eli Tan wrote in August.
Bitcoin rose about 70% from a low of around $30,000 toward a high of nearly $50,000 in early September as traders reacted to the news from El Salvador – seen by many fans of the digital asset as a long-awaited validation of its potential to serve a global currency.
A growing number of users on social media platforms, including Twitter and Reddit, called for people to buy small amounts of bitcoin in support of El Salvador’s bitcoin policy, Bloomberg reported.
Still, the nearly 7% BTC drop in September looked far less severe than the 50% price crash in April and May.
Bitcoin climbed from $40,000 toward $65,000 in October, spurring visions of $100,000 by the end of the year.
But not all bitcoin-related ETFs are created the same: A bitcoin futures ETF is backed by futures contracts such as those traded on the Chicago Mercantile Exchange.
“Look, we’re up 40% this month, which is only 15 days old, a pause that refreshes,” Mark Yusko, CEO and chief investment officer of Morgan Creek Capital Management, said during a CNBC interview on Oct.
In the days following BITO’s trading debut, bitcoin continued upward to hit an all-time price high of around $69,000.
Some indicators such as the crypto “Fear & Greed Index” showed the market in “extreme greed” territory, which typically precedes price drops, as shown in the chart below.
On the final day of 2021, bitcoin was changing hands around $48,000, up 63% on the year.
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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis.
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