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Bitcoin ‘May Not Last Much Longer’ Warns A Cornell Trade Policy Professor

Published December 28, 2021

Cryptocurrencies were unrivaled channels of greed and fear in 2021, minting and wiping away fortunes as they moved wildly while adding $1.5 trillion to the entire market value.

Bitcoin, which has gained almost 60% in value this year, has taken a lot of attention, but it has had to share its limelight with the likes of Ether and Binance Coin and tokens like Dogecoin and Shiba Inu.

Ethereum has constantly frolicked as second fiddle to Bitcoin, but it has been a bright spot for investors up to this point in 2021. To this point, the second-largest cryptocurrency by market capitalization has made nearly 400 percent increases.

Binance is the world’s largest cryptocurrency exchange, and Binance Coin helps users trade on the network by offering a 25 percent discount on transaction costs.

How Did Bitcoin Perform in 2021? 

In fact, during 2021, Bitcoin’s share of the crypto market fell considerably while other tokens soared, indicating how capitalist interest in digital assets grew despite or maybe because of massive volatility.

“Given the proliferation of assets inside the crypto domain, as well as the multiple use cases,” said Vijay Ayyar, Asia Pacific head of crypto exchange Luno in Singapore, “the reduction in Bitcoin’s dominance will almost probably continue next year.”

According to CoinGecko tracker, which tracks almost 12,000 tokens, the entire worth of cryptocurrencies increased by around $1.5 trillion in 2021 to about $2.3 trillion as of Dec. 17, 2021.

Bitcoin, the most popular cryptocurrency globally, began the year with a 70% market share. This has dropped to only 40 percent, mainly due to Ether’s improved quality. Money has also flooded into other tokens, which some view as a sign of speculative froth that might destabilize the market.

The debate about Bitcoin’s alleged influence in investment portfolios is still raging. Its supporters believe it provides a buffer against some of the best inflation rates in a decade. However, in 2021, the token correlated more consistently with risk assets, such as technology stocks, rather than inflation projections.

Overview of Galaxy Crypto Index 

This year, the Bloomberg Galaxy Crypto Index has increased by almost 160 percent, far surpassing increases in traditional assets like commodities and world stocks, which have increased by 23 percent and 13 percent, respectively. Given the extreme volatility of cryptocurrencies, the adage “no pain, no gain” also applies.

After a nearly 30 percent plunge from a record high achieved just over a month ago, Bitcoin is presently challenging crucial technical support levels. One is the 55-week moving average, which has historically served as a floor for selloffs. At the same time, another is a level of $44,100 identified by a Fibonacci analysis of the rise from March 2020 through to the peak of November 2021. The cryptocurrency has already broken below a trend line that has been drawn from the start of the pandemic’s advance.

Stablecoins are Also Taking the Lead

Stablecoins are digital tokens tethered to a reserve currency that serves as hedging measures against the probable drop of underlying cryptocurrency collateral prices, and they’ll be the industry’s greatest chance heading into 2021. Stablecoins may even see growth next year due to two factors: 

  • One, the extended instability of non-centralized tokens.
  • Two, the current stable coin market leader, tether, is about to be dethroned.

Tether (USDT), being one of the first stablecoins to succeed in the concept, has gone through several well-publicized growing pains as the sub-industry matured. Several stablecoins have already entered the sector in an attempt to usurp its supremacy.

Futuristic Call

While it’s difficult to predict which digital currencies will experience significant value increases in 2022, we can safely state that cryptocurrencies will not be exploited anytime soon. 

Blockchain, the underlying technology behind multiple cryptocurrencies, has grown in popularity outside of the digital currency industry, and new uses are likely to emerge this year. Governments and regulators are still figuring out how to make digital tokens more accessible and manageable.

The era of cryptocurrencies may have come and gone, but there is a chance that the crypto industry still has a lot of potential upsides to explore. We do know one thing for certain: cryptocurrencies were originally expected to spend the whole national economy. That type of controversy doesn’t go away overnight, so expect to hear from cryptocurrencies for at least another year, if not longer.

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