What led to the Bitcoin price fluctuation in 2021

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A recent annual report published by WazirX, an Indian crypto exchange, claimed that Bitcoin (BTC) was the most traded cryptocurrency in 2021. Bitcoin, the oldest cryptocurrency on the market, has, however, seen a price swing throughout throughout the year. The lowest BTC price was recorded on January 1 at $ 28,803.59, while the highest price it touched was $ 68,789.63 on November 10, a difference of 138.8 %. China’s crackdown on cryptocurrencies, US tax rules and the new Omicron variant of Covid-19 have played a critical role in affecting the value of BTC.

Major peaks and valleys in 2021

Although BTC experienced its highest average price in November, market volatility drove it down sharply in December and recorded its lowest price in January. The average price between November and December fell by almost 14%. While this plunge may be an indication of the risk aversion sweeping financial markets, experts believe the Omicron variant of the coronavirus may be one of the reasons contributing to this volatility, as it has had an impact on many other financial sectors. Wall Street has also seen a global meltdown in financial markets recently, amid concerns about the impact of the omicron variant, inflation and other forces on the economy, The Associated Press reported.

The year began with BTC recording what would be one of the lowest average prices of the year, as Europe was hit by the deadly second wave of Covid. As prices jumped between the two, they were once again hit by Omicron’s threat to the world. The only difference is that the decline in January was not as strong (since its value was small even at the end of 2020) as in December in percentage terms. Among various other contributing factors that lead to extreme volatility in BTC, Covid appears to be having maximum impact.

Main factors behind ridges and valleys

Covid: Prices fell drastically as the second wave of Covid swept the world. While the second wave began in European countries in late 2020, it took deadly form across the world in mid-April. The average price plunged nearly 20% between April and May, despite a record one of the highest average prices of $ 56,288.88 in April. The next month was even worse. In June, BTC not only experienced the lowest average price of the year in June and July, but the average price plunged more than 22% between May and June, when the number of reported Covid cases was at its peak. apogee. As the number of Covid cases and deaths peaked in May 2021, the average price of BTC was declining at a rapid rate.

However, soon after, in July, it saw the biggest increase in the average price, peaking almost 22%. Since July, BTC has seen a steady increase in the average price, until the threat of the third wave occurred with cases of Omicron reported. Between November and December, BTC faced a drop of more than 15% in its average monthly price.

Other factors: Several other political factors largely contributed to this fall. While the growing fear of the third wave of Covid was there, factors like widespread hacking in various crypto exchanges, China’s crackdown on cryptocurrency mining also affected the price, experts believe.

China, intending to wipe out crypto mining from the country, cracked down on bitcoin mining in November. “We will focus on cleaning up state units involved in mining virtual currency and bitcoin, reiterating that all activities related to virtual currency are illegal. Virtual currency does not have the same legal status as legal tender, ”said China Global Television Network, citing the country’s National Development and Reform Commission (NDRC).

The United States Securities and Exchange Commission (SEC) has rejected a spot bitcoin exchange-traded fund (ETF), which would likely have seen billions of dollars poured into the crypto market.

The U.S. infrastructure bill, signed by President Joe Biden at a White House event in November, includes new crypto legislation. Under the new legislation, brokers must issue a 1099-B which will be notified to the IRS. So the gains will now be visible and there will be tax implications and hence the market reacts.

“BTC has seen two major bull market disruptions this year, each caused by a series of events, including a positive ‘sell the news’ event followed by several negatives. The first was the Coinbase IPO as a peak sentiment, followed quickly by Chinese bans and Tesla’s withdrawal from accepting BTC as a payment method. The second trough followed the approval of the futures ETF as a peak sentiment, which quickly declined. transformed after Omicron and rate and currency fears surfaced as the Fed focused jobs on inflation, ”said Kapil Rathi, co-founder and CEO of CrossTower, a global crypto exchange.

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