Over the past few years, despite the surges and declines, Bitcoin has been gaining overall popularity with institutions and retailers looking to the digital currency as an alternative investment and payment system. In the past year, the price of Bitcoin has been on a rollercoaster ride, reaching all-time highs and experiencing sharp drops.
The rise of Bitcoin in 2020
In the early part of 2020, the price of Bitcoin was relatively stable, hovering around the $7,000 mark. However, as the COVID-19 pandemic began to take hold, the price of Bitcoin started to rise, increasing from a bearish price in March 2020. In April 2021, the price of Bitcoin reached an all-time high of almost $70,000. This spike in price was driven by a combination of increased demand for the cryptocurrency, as well as a growing number of mainstream companies and investors getting involved in the market.
However, after reaching its all-time high, the price of Bitcoin started to fall.
Why Bitcoin saw a bearish decline in 2021
By June 2021, it had dropped to around $30,000, and by the end of the year, it had dropped further to trade at around $28,000. This decline in price was a result of a number of factors.
China’s crackdown on Bitcoin
In May 2021, China’s central bank and other government agencies issued a statement banning financial institutions and payment companies from providing services related to cryptocurrency transactions. This caused a drop in demand for Bitcoin from Chinese investors and traders, leading to a decline in its price.
The environmental impact on Bitcoin and regulation around mining
Another factor that contributed to the decline in Bitcoin’s price was concerns over its environmental impact. Bitcoin mining, which is the process of creating new Bitcoins, requires a significant amount of energy, and the increasing popularity of Bitcoin mining has led to concerns over its impact on the environment. Some investors may have sold off their Bitcoin holdings due to concerns over the environmental impact of the cryptocurrency.
A recorrection in the market
Additionally, some experts believe that the price of Bitcoin had become overheated and that the recent decline was simply a correction after the huge spike in April 2021. The price of Bitcoin had reached an all-time high in April 2021, which some experts believe was not sustainable and was due for a correction.
Overall investment and macro-environmental factors
Furthermore, there was also a general bearish trend in the crypto market which affected all the cryptocurrencies. As institutional investors and big companies entered the market and started to invest in the crypto space, they started to move the market in a bearish direction, which caused the prices to decrease.
Despite the recent decline in price, many believe that the long-term outlook for Bitcoin is still positive. Experts point to the growing number of mainstream companies, such as MicroStrategy, Block Inc, and Tesla, and investors getting involved in the market, as well as the increasing adoption of blockchain technology, as reasons to be bullish on cryptocurrency. Additionally, some experts believe that the bearish drop in price in 2021 through to 2022 is simply a correction after the huge spike in April 2021 and they predict that Bitcoin will continue to rise in the long term.