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Bitcoin is a volatile cryptocurrency with a track record of “boom and bust” cycles. The digital currency has been on some ride over the course of 2021, hitting an all-time high in April before plummeting back down.
Bitcoin, and those invested in it, has been on a rollercoaster ride of late, rising sharply and falling equally so on the back of a number of news stories.
So what is happening? Well, lots.
In this article we explain:
- What is happening to the value of bitcoin and why
- Where will bitcoin head next
- What you need to consider before investing in cryptocurrency
What is happening to Bitcoin?
Bitcoin, and those invested in it, has been on a rollercoaster ride of late, rising sharply and falling equally so on the back of a number of news stories.
- 16 December 2020: Price hits $20,000 per coin for the first time
- 13 April 2021: Value hits a record high of $63,375
- 22 June: Falls to under $30,000 for the first time in 5 months
- 2 August: Bitcoin rallies to it’s highest level since May $40,000
So what is happening? Well, lots.
Negative stories
A number of negative stories and threats of further regulation have pushed the price of Bitcoin down:
In May, Elon Musk said that Tesla would no longer be accepting cryptocurrency payments over concerns about the environment
Sanctions from the Chinese government in June 2021 on trading and mining Bitcoin
UK banks block payments to crypto exchanges
Donald Trump described bitcoin as a scam competing against the dollar to be “the currency of the world” in June
FBI agents seized millions of dollars in bitcoin from criminals
UK’s financial watchdog blacklists Binance, one of the largest crypto exchanges. Big banks such as HSBC and Santander follow suit
The IMF issues a warning in August on countries using cryptocurrencies as legal tender, saying it’s widespread use would threaten “macroeconomic stability” and could harm financial integrity
Positive stories
But there have been more positive stories which have pushed the price upwards in 2021:
Electric-car maker Tesla bought $1.5bn of bitcoin in February
Morgan Stanley became the first big US bank to offer wealthier clients access to bitcoin funds – albeit restricted to no more than 2.5% of an investor’s total net worth in March
In June, Elon Musk says Tesla will likely accept bitcoin payments again when more than 50% of its energy usage comes from renewable sources
Amazon posts a job ad for a “Digital Currency and Blockchain Product Lead” prompting speculation it will soon accept bitcoin as payment
El Salvador is making bitcoin legal tender from September 7
Has bitcoin’s bubble burst?
When assets rise very quickly in price, typically this makes a crash much more likely. Or at the very least a correction, when the price falls back down to a more “normal” level.
That is the situation bitcoin is in right now. Although no one can really say what is a “normal” level for bitcoin.
It took the cryptocurrency 11 years from launch to get to $20,000 per coin, but only three weeks for bitcoin’s price to double from there. It soared more than 700% in 12 months. A single bitcoin had been priced at an all time high of $63,000 in April. It is now trading at over a third less.
Where it is heading next is equally unpredictable.
Find out more: “Bitcoin’s rollercoaster ride has swept me to an £8,500 profit in less than a year”
Will bitcoin rise again?
It is impossible to tell. There are a number of concerns for those invested in cryptocurrencies:
Crackdowns in China, Turkey and Denmark
Calls for greater regulation across the globe and concern expressed from central banks and regulators
Environmental concerns
It’s price is based solely on speculation
Further regulation is seen as a threat to the decentralisation of crypto, which is impacting on price.
Bitcoin’s fans point to its positive qualities:
Transformative technology which could revolutionise industries
Simpler and cheaper transactions by cutting out the “middle man”
Easier global trade
Transactions are more confidential
A safe store of value because it can’t be printed or seized
Bitcoin has been touted as an alternative to gold, meaning it could prove itself as a hedge against inflation
Given its volatile nature, it is possible that bitcoin will gather momentum again at some point in the future (perhaps weeks, months or even years down the line).
A number of negative stories and threats of further regulation have pushed the price of Bitcoin down:
In May, Elon Musk said that Tesla would no longer be accepting cryptocurrency payments over concerns about the environment
Sanctions from the Chinese government in June 2021 on trading and mining Bitcoin
UK banks block payments to crypto exchanges
Donald Trump described bitcoin as a scam competing against the dollar to be “the currency of the world” in June
FBI agents seized millions of dollars in bitcoin from criminals
UK’s financial watchdog blacklists Binance, one of the largest crypto exchanges. Big banks such as HSBC and Santander follow suit
The IMF issues a warning in August on countries using cryptocurrencies as legal tender, saying it’s widespread use would threaten “macroeconomic stability” and could harm financial integrity
Positive stories
But there have been more positive stories which have pushed the price upwards in 2021:
Electric-car maker Tesla bought $1.5bn of bitcoin in February
Morgan Stanley became the first big US bank to offer wealthier clients access to bitcoin funds – albeit restricted to no more than 2.5% of an investor’s total net worth in March
In June, Elon Musk says Tesla will likely accept bitcoin payments again when more than 50% of its energy usage comes from renewable sources
Amazon posts a job ad for a “Digital Currency and Blockchain Product Lead” prompting speculation it will soon accept bitcoin as payment
El Salvador is making bitcoin legal tender from September 7
Has bitcoin’s bubble burst?
When assets rise very quickly in price, typically this makes a crash much more likely. Or at the very least a correction, when the price falls back down to a more “normal” level.
That is the situation bitcoin is in right now. Although no one can really say what is a “normal” level for bitcoin.
It took the cryptocurrency 11 years from launch to get to $20,000 per coin, but only three weeks for bitcoin’s price to double from there. It soared more than 700% in 12 months. A single bitcoin had been priced at an all time high of $63,000 in April. It is now trading at over a third less.
Where it is heading next is equally unpredictable.
Find out more: “Bitcoin’s rollercoaster ride has swept me to an £8,500 profit in less than a year”
Will bitcoin rise again?
It is impossible to tell. There are a number of concerns for those invested in cryptocurrencies:
Crackdowns in China, Turkey and Denmark
Calls for greater regulation across the globe and concern expressed from central banks and regulators
Environmental concerns
It’s price is based solely on speculation
Further regulation is seen as a threat to the decentralisation of crypto, which is impacting on price.
Bitcoin’s fans point to its positive qualities:
Transformative technology which could revolutionise industries
Simpler and cheaper transactions by cutting out the “middle man”
Easier global trade
Transactions are more confidential
A safe store of value because it can’t be printed or seized
Bitcoin has been touted as an alternative to gold, meaning it could prove itself as a hedge against inflation
Given its volatile nature, it is possible that bitcoin will gather momentum again at some point in the future (perhaps weeks, months or even years down the line).
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