Bitcoin in 2021: The Highs and Lows
Bitcoin

Bitcoin in 2021: The Highs and Lows

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Elon Musk took an interest in Bitcoin, a country adopted the cryptocurrency as legal tender, exchange-traded funds hit the market for the first time, and there were some BIG corrections.

Bitcoin in 2021: The Highs and Lows

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Bitcoin had started 2021 with momentum after a stunning surge in the December that came before.

Given everything that's happened this year, it's rather surreal to think that BTC was worth a mere $29,000 on New Year's Day.

Kicking off a festive series of articles for CoinMarketCap Alexandria, we take a look back at the news stories that defined Bitcoin in 2021… for better or worse.

January: Elon Musk Takes an Interest

Dusting off the record books in Bitcoin's 13-year history, January doesn't typically tend to be bullish. But the world's biggest cryptocurrency bucked the trend this year… gaining 14.5% over the course of the month.
Within a week of the world chiming in the New Year — a pared-back affair because of lockdown restrictions — BTC had surged by 42.6%, hitting $41,357. Not only was this a new all-time high (and the first of many for 2021) but it more than doubled the previous record price of $20,089 that had been set in December 2017. This level hadn't been reached for the best part of three years — and understandably, those who had "diamond hands" and HODLed all this time would have been feeling especially triumphant.
But volatility cuts both ways, and there was plenty of choppiness for Bitcoin as the month continued. Jan. 11 saw BTC tumble by more than 20%. While pretty tame in percentage terms, it was unprecedented in dollar terms — a $10,000 drop in 28 hours. Ouch.
Bitcoin had started to recover later in the month, but then dipped below $30,000 after two bad stories emerged in tandem. Janet Yellen, who was Joe Biden's pick for Treasury Secretary, called for BTC's use to be "curtailed" during a confirmation hearing in Congress. And to make matters worse, BitMEX Research wrongly suggested a double spend had occurred on the Bitcoin blockchain — temporarily shaking confidence in the digital asset.

Over in the stock market, r/WallStreetBets was playing havoc with hedge funds — with retail traders inflicting pain on the big boys through the mother of all short squeezes.

And that brings us to Elon Musk. The Tesla CEO had previously declared that he owned "zero cryptocurrency" — well, except from 0.25 BTC that a friend had once given him.
The über-billionaire had occasionally caused the joke cryptocurrency Dogecoin to surge with short and often cryptic missives from his Twitter account. But as January drew to a close, Musk turned heads by quietly adding the hashtag #bitcoin to his Twitter bio. BTC rallied by $5,000 in a matter of minutes — hitting $38,000 before handing back a large chunk of these gains.

Those of you with long memories will know that, when it comes to Elon Musk and Tesla, the story is only just beginning.

February: Seismic Milestones for Adoption

As ever, central bankers were trying to sound the alarm over Bitcoin — warning investors need to be prepared to lose all of their money.

But their cautious remarks were about to be overshadowed by a bombshell that would take the crypto markets — and Wall Street — by surprise.

On Feb. 8, Tesla revealed that it had bought BTC worth $1.5 billion in a filing with the U.S. Securities and Exchange Commission — and to go one further, the cryptocurrency would be accepted as a payment method for its electric cars.
BTC rallied hard, accelerating from $39,000 to $47,000 within 24 hours. Beyond lesser-known companies such as MicroStrategy and Square, this was the first major brand to embrace Bitcoin so eagerly.
Days later, Mastercard stepped into the fray — announcing that it intended to support digital assets on its network by the end of 2021. That followed in the footsteps of PayPal making BTC, ETH, BCH and LTC available to the masses. The credit card giant had said:

"Whatever your opinions on cryptocurrencies — from a dyed-in-wool fanatic to utter skeptic — the fact remains that these digital assets are becoming a more important part of the payments world."

Riding on the wave of major adoption news, BTC hit $50,000 for the very first time on Feb. 17. To put that into context, that capped off gains of 72% in the space of six weeks. It wasn't long before another seismic milestone was reached, with Bitcoin's market cap breaching $1 trillion for the very first time.
Despite the fact that Tesla had made an estimated $1 billion in paper profits from its BTC investment in the space of a month — more than what it made from cars across the whole of 2020 — it seemed Musk wasn't satisfied. He raised eyebrows by tweeting that the prices of Bitcoin and Ether "seem high."
Prices had cooled off by the time February drew to a close — momentarily dipping below $44,000 on the final day of the month. Undeterred, MicroStrategy and Square opted to radically increase their BTC holdings.

But as the bulls like to say, there was plenty of fuel in the rocket for a further leg up in March.

March: Technokings, Tether Ransoms

Another month, another record high for Bitcoin — with the digital asset peaking at about $61,500 in March.
There were several other headlines that dominated the news agenda. In the middle of the month, Musk caused a stir by declaring he should no longer be referred to as Tesla's chief executive — and instead, he would like to be known as Technoking. His chief financial officer Zach Kirkhorn, you ask? Master of Coin.
And in other developments, true to his word, Tesla began accepting BTC as a payment method… though many Bitcoiners questioned whether devoted investors would actually want to part with their hard-earned crypto — perhaps fearing a reprise of what happened to Bitcoin Pizza Guy.
Meanwhile, PayPal revealed that demand for its crypto service had already "greatly exceeded" internal projections — and those who had snapped up digital assets through its platform were logging in twice as much as they were before. CEO Dan Schulman, who wasn't a fan of digital assets for quite a long time, also revealed new details of how PayPal planned to up the ante by launching a business unit dedicated to cryptocurrencies.
To cap everything off, the end of March brought the arrival of Checkout with Crypto in the U.S. — giving American investors a chance to spend digital assets at "millions of global online businesses." The feature converts coins to fiat at the checkout to give consumers certainty, all while ensuring that there wouldn't be any additional transaction fees. Schulman said at the time:

"Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies."

April: A Big Rise… and a Sharp Fall

Bitcoin was sitting pretty as April began — starting the month at $59,000. Within a matter of weeks, the digital asset raced to a new all-time high of $64,000, fueling optimism that a breakout to $100,000 was just around the corner.
This came as Coinbase geared up for a box office IPO, with the exchange making its debut on the U.S. stock market. Little did we know at the time that COIN would struggle to entice investors on Wall Street, with the trading platform prone to downturns that coincided with BTC crashes.
Later in the month, Bitcoin began to head south… with prices briefly dipping below $50,000. There was unease after speculation grew that President Biden was planning to double capital gains tax for anyone who earns over $1 million — exceedingly bad news for many of the crypto investors who had raked in big bucks during the bull run. Tesla also revealed that it had sold $272 million of the $1.5 billion in Bitcoin it sold, but price gains ultimately meant it "trimmed its position by 10%."

Musk later explained that Tesla had done this "to prove liquidity of Bitcoin as an alternative to holding cash on a balance sheet."

With crypto critics regularly predicting that BTC will eventually head to zero — and gleefully forecasting its demise after every correction — there was also some light-hearted relief from a Reddit user who vowed that Bitcoin will never go to zero in his lifetime. Why?

"Because I am willing and able to buy all the Bitcoin ever mined at $0.01 each. So the next time a Bitcoin skeptic brings up the Bitcoin going to zero argument, just let them know that a random Reddit guy on the internet said that he will not let that happen."

May: Tesla U-Turn Crashes Bitcoin

Bitcoin began May with a sense of purpose — and with prices holding steady at $57,000, there was every reason to suspect that the No. 1 cryptocurrency was gearing up to have another crack at all-time highs.

But technical analysis and beautifully drawn charts are out of the question when unexpected news events take over.

In a statement late on May 12, Elon Musk dropped an almighty bombshell when he tweeted a statement declaring:

"Tesla has suspended vehicle purchases using Bitcoin. We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel."

Musk had come under a lot of pressure for getting Tesla involved in Bitcoin in the first place, with critics arguing that the electric vehicle maker's investment was at odds with its eco-friendly image.

Although the "Technoking" said the company didn't plan to offload the BTC it had purchased, he warned that the cryptocurrency wouldn't be accepted as a payment method until the energy used for mining came from more renewable sources.

It doesn't take a rocket scientist to deduce that Musk had single-handedly tanked Bitcoin — with a 16% crash causing it to shed $7,000 in the blink of an eye.

The billionaire entrepreneur had long faced accusations that he used Twitter to mess with the markets, and there was further evidence of this on May 16, when a one-word post spooked crypto investors.

@CryptoWhale had written that, with the amount of hate Musk was getting, he "wouldn't blame him" if Tesla dumped its BTC holdings. The CEO replied…

"Indeed."

Prices took a dive below $45,000 as investors frantically tried to deduce what Musk's tweets meant. But the following morning, he wrote:

"To clarify speculation, Tesla has not sold any Bitcoin."

Musk's status as a hero in the crypto space was diminishing fast — and there was no shortage of exasperation over his "s***posting."

But other Twitter users pointed to a wider issue, writing:

"If Elon can decide the price of Bitcoin, it has failed as a currency."

All of the drama ultimately took BTC down to $32,000 — and it struggled to break through $40,000 for the rest of the month.

June: A Big Announcement at Bitcoin 2021

Miserable May soon made way for Jubilant June — in a development that would dominate the headlines for the rest of the year.

In a pre-recorded video message at the Bitcoin 2021 conference in Miami, President Nayib Bukele revealed that El Salvador planned to make BTC legal tender, and said:

"In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy."

This was a big deal — not least because the Central American nation would become the first in the world to make such a drastic move.

Bukele's belief was that this would draw investment to El Salvador. On Twitter, he pointed out the country is home to "great weather and world-class surfing beaches" — adding BTC wouldn't be subject to capital gains tax, and crypto entrepreneurs would benefit from "immediate permanent residence."

It's fair to say that markets were pretty muted about the news, with BTC holding steady at about $35,000.

Musk was never far from the limelight. On June 13, Sygnia's CEO Magda Wierzycka was quoted as saying:

"What we have seen with Bitcoin is price manipulation by one very powerful and influential individual."

This prompted a response from the man himself, and the news that Tesla was prepared to start resuming Bitcoin transactions once there was confirmation that 50% of the energy used by miners was clean. Some crypto devotees argued this was already the case, but extensive data on this was — and remains — difficult to come by.

Unfortunately, there was further pain to come. As the end of the month approached, China intensified its crackdown on mining, with measures that would ultimately force many miners to leave the country.

An 8% plunge took it to $32,000 — and the following day, it fell below $30,000. With prices now 53% below the all-time highs set two months earlier, panicked investors feared it was all over. The flurry of bad news had completely wiped out all of the gains that BTC had made over the previous six months.
Overall, Bitcoin fell by 40.36% in the second quarter of 2021, the biggest three-month drop seen since 2018.

July: Regulators Step Up

The doom and gloom continued well into the summer — traditionally a quieter time for the crypto markets anyway — with further dips below $30,000.

July was punctuated by the fallout from China's mining ban. With farms closing down their operations en masse, a sharp drop in hash rate soon followed — that's the total computing power on the Bitcoin blockchain.

This meant that difficulty levels — how hard it is to add a block to the network and receive brand-new BTC — plunged by 28%. As the year progressed, we gradually saw hash rate begin to come back online, with the U.S. gaining the most market share.

Meanwhile, the Securities and Exchange Commission once again delayed its decision on whether to approve a Bitcoin exchange-traded fund — preventing institutions from gaining exposure to the asset class.

Craig Wright, the man who claims he is Satoshi Nakamoto, took Bitcoin.org to court — accusing the website of copyright infringement for hosting BTC's whitepaper. Cøbra, the site's current operator, lost the case because they wanted to preserve their anonymity. They were ordered to remove the whitepaper from their website, and pay tens of thousands of dollars in costs.

Simon Cohen, a senior associate at the law firm that represented Wright in the court case, told the CoinMarketRecap podcast at the time:

"What I can say is that from what I have seen, and the conversations that I have had with various people, I and my colleagues are satisfied that Craig Wright did author the whitepaper."

August: A Tentative Recovery

Bitcoin showed its true resilience in August by surging to $50,000 — accelerating by 70% in the space of a month, and delivering the clearest signal yet that the bull run is far from over.

Markets were also cheered by Google announcing that it was loosening its ban on crypto adverts — paving the way for exchanges and wallets to start advertising their goods and services. Ads for ICOs, DeFi, crypto loans, and celebrity shills remain banned.

But this came as the Biden administration pursued plans to raise $28 billion in revenue from the crypto industry through a $1 trillion infrastructure bill — with a number of executives warning that the measures included in this policy were "unworkable."

Meanwhile, as El Salvador geared up to make Bitcoin legal tender, Fitch Ratings warned that the move could affect the credit scores of businesses in the country — increasing their cost of borrowing.

And in other developments, PayPal announced that it was rolling out its crypto service beyond U.S. shores — with customers in the United Kingdom also given the chance to buy, sell and hold digital assets.

September: El Salvador Embraces Bitcoin

In a milestone that will go down as one of the most significant events in 2021 — scratch that, in Bitcoin's history — El Salvador made the cryptocurrency legal tender on Sep. 7, putting it on par with the U.S. dollar.

Every adult in the country was given a reward of $30 in Bitcoin, which they could claim through the government's official Chivo wallet.

There were teething troubles. Chivo was unable to cope with the volume of user registrations — and to make matters worse, the software wasn't available on a number of major app stores.

Many in the country were also against the drastic measures — especially considering that merchants would be legally obliged to offer BTC as a payment method. Although the likes of Starbuck's and McDonald's dutifully upgraded its infrastructure, there were protests on the streets — and at one point, a Bitcoin ATM was set on fire.

And with incredibly unfortunate timing, BTC also suffered a sharp plunge on Sep. 7 — rejecting from $52,000 and tumbling to $47,000. Salvadoran consumers were given a harsh lesson in how volatile Bitcoin can be. President Nayib Bukele attempted to put a brave face on things — and announced the country was "buying the dip."

In other news, Twitter added Bitcoin to its popular Tip Jar feature — allowing content creators to receive crypto from fans on the platform.

October: Bitcoin ETFs… and a $1T Market Cap

As the final quarter of 2021 began, the bearish turn over the summer began to feel like a distant memory.

October started at $43,750 — and in part, the painful sell-offs were linked to Evergrande. The Chinese property developer was struggling to make interest repayments on $300 billion in debt, and there were fears its collapse could send shockwaves through the global markets. Investors dumped risky assets in response.
Nonetheless, we'd see a 52% surge over the course of the month. New all-time highs were made of $67,000 — a marginal improvement on the $64,000 set in April. Bulls struggled to push prices much higher than this.
With a $1 trillion market cap secured once again, the big headline was the arrival of Bitcoin exchange-traded funds backed by futures contracts. The ProShares Bitcoin Strategy ETF was the first to launch, with trading volumes hitting $1 billion on day one.
October is historically a good month for Bitcoin. The only losses on record since 2013 came in 2014 and 2018. Even then, they were pretty tame in percentage terms — coming in at 12.95% and 3.83% respectively. Ultimately, 2021's October gains totted up to 39.93%, the healthiest gains seen since 2017. Confidence was growing among analysts that BTC would end the year with a "blow-off top."

November: New Records as Inflation Soars

The fall continued to deliver rises for Bitcoin — with an (as yet unbeaten) all-time high of $68,789.63 set on Nov. 10. This came hot on the heels of jaw-dropping data in the U.S. that revealed the Consumer Price Index hit 6.2% in October, the fastest rate of inflation since 1990.

All of this added fuel to the narrative that Bitcoin was an effective hedge against inflation — a place where investors could store savings and protect their value.

There were further green shoots of adoption too — Miami set out its stall as the "crypto capital of the world," with ambitions to offer a Bitcoin divided to all its citizens. New York City also elected Eric Adams, another BTC enthusiast. And as a cherry on the top, the Taproot upgrade launched — enhancing transaction privacy while opening the door to smart contracts.

Unfortunately, the party atmosphere wasn't going to last for long. As the month progressed, BTC slid to $53,000. Traders were taking profits off the table, but there were also jitters at the prospect that India was seriously looking into banning cryptocurrencies once again. Markets were then spooked by the arrival of the Omicron variant, amid fears that it could be more transmissible than previous COVID strains — and more resistant to vaccines.

Even El Salvador's Nayib Bukele couldn't cheer up the markets with his plans to build Bitcoin City at the base of a volcano.

December: A Dramatic Plunge

The crypto markets ended the year with further pain — and a terrifying plunge.

On the first weekend of December, BTC suddenly fell by almost $10,000 in a matter of minutes… from $52,000 to $42,000.

Low levels of liquidity, when coupled with high amounts of leverage, created a "cascading effect" of sell-offs. Long positions worth billions of dollars were liquidated in the blink of an eye.

Omicron continued to be a threat that the markets couldn't ignore, with some countries reintroducing lockdown restrictions to stop its spread. Meanwhile, Evergrande officially slid into default — and the Fed confirmed that it planned to turn off the money taps from March, setting the stage for three interest rate rises in 2022.

With BTC pinned below $50,000, analysts were instead setting their sights on the first quarter of 2022 for explosive gains. It remains to be seen whether they'll be right — or whether they're in denial that crypto winter has arrived, fulfilling the prophecy of four-year cycles that led to a terrible performance in 2014 and 2018.
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