2021 Cryptocurrency Mid-Year Recap: An Eventful Period

Bitcoin:

Let's take a look at the timeline of the world's most valuable digital asset in the first half of this year first.

On January 19 2021, Elon Musk placed the handle #Bitcoin in his Twitter profile, tweeting "In retrospect, it was inevitable", which caused the price to briefly rise about $5,000 in an hour to $37,299.

On January 25 2021, Microstrategy announced that it continued to buy Bitcoin and as of the same date it had holdings of 70,784 Bitcoins worth $2.38 billion.

On 8 February 2021 Tesla's announcement of a Bitcoin purchase of USD $1.5 billion and the plan to start accepting it as payment for vehicles, pushed the digital asset's price to $44,141. 

On February 18 2021, Elon Musk stated that "owning Bitcoin was only a little better than holding conventional cash, but that the slight difference made it a better asset to hold".

In May 2021, Chinese government took actions against the mining of cryptocurrencies. More than 75% of Bitcoin mining took place in China.

In June 2021, the Legislative Assembly of El Salvador voted legislation to make Bitcoin legal tender in El Salvador. The law will take effect on September 7.

BTC's price is currently 13% higher than its price when the year of 2021 began. The growth, however, is anything but linear. Bitcoin price peaked in April, hitting almost US$60,000, compared to roughly $35,000 in January. The price, however, plummeted to as low as $29,000 in Mid-June, which only lasted for a very short period before it bounced back to $30,000. But the nosedive practically erased all of the growth it achieved so far this year.

Most analysts attribute the soar-up to Elon Musk, the CEO of Tesla, who filled the confidence of investors by announcing the addition of Bitcoin to its balance sheet and accepting BTC payments. But the love affair between Elon Musk and BTC didn't last long when he reversed his position in May and said that Tesla no longer accept the cryptocurrency because it is not worth compromising the environment.

To make things worse, a series of crackdown operations against crypto mining were carried out in China in May, where most of the world's crypto mining took place.

On the other hand, half Earth away from China, the year of 2021 is marked as the first year in which Bitcoin was officially adopted by another country in South America. The country El Salvador recognizes BTC as a legal tender after its Congress approved the proposal from Nayib Bukele, the President, to embrace the crytocurrency, scraping all associated capital gains tax.

The President also vowed to make the country's geothermal energy useful by ordering a state-owned power company to build geothermal facilities that use the energy from volcanoes for Bitcoin mining.

"From $60,000 to $50,000 BTC prices, we saw almost $10 billion in liquidations on exchanges, which at the time, was about three times larger than any previous liquidation. Then, from $40,000 to $30,000, we saw another $10 billion in liquidations on that huge move before it bounced back up to around $40,000. That represented around 800,000 traders liquidating their entire accounts.

"So, that just tells you that this is a nascent market. There are huge players who have the ability to very easily move prices once they start to trigger that leveraged liquidation cascade. That's what you see in this market. That's the reason that we have many more dramatic moves when it goes down," according to Scott Melker "the Wolf of All Streets".

 

Ethereum:

Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (ETH) is the native cryptocurrency of the platform. After Bitcoin, it is the second-largest cryptocurrency by market capitalization.

The biggest milestone throughout the first six months for ETH will be the upgrade to Eth2.0. Ethereum 2.0 (ETH2) is an upgrade to the Ethereum network that aims to improve the network's security and scalability. This upgrade involves Ethereum shifting their current mining model to a staking model. Consequently, the price of ETH has risen considerably this year as the upgrade progresses.

The successful completion of the Berlin hard fork was one of the year's most significant advancements. Four Ethereum Improvement Proposals (EIPs) are included in the upgrade, with the goal of decreasing fees and adding new transaction types.

 

Dogecoin:

Dogecoin is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system as a joke, making fun of the wild speculation in cryptocurrencies at the time. Despite its satirical nature, some consider it a legitimate investment prospect.

It was always been underestimated and seen as a joke by many, just like its origin, a famous emoji of a smiling Shiba Inu dog.

But things have changed in this year.

In January 2021, Dogecoin went up over 800% in 24 hours, attaining a price of $0.07, as a result of attention from Reddit users, partially encouraged by Elon Musk and the GameStop short squeeze. In February 2021, Dogecoin hit a new high price of $0.08 following Twitter encouragement from Musk, Snoop Dogg and Gene Simmons. In March 2021, Dallas Mavericks owner Mark Cuban announced his NBA team would allow purchasing tickets and products with Dogecoin; within two days, Cuban had declared his franchise had become the top Dogecoin merchant, having carried out 20,000 transactions.

This eventually resulted in a significant boom-and-bust cycle. However, the price is up more than 5,000% since the beginning of the year. So, for those who bought it at the right time, its performance is still looking pretty good.

 

Fazzaco has published an analysis on cryptocurrency earlier:

Crypto Market Overview: Tighter Regulation vs. Investors' Mania