附近上门

By

By most metrics, 2021 has been an astonishingly successful year for Bitcoin.

In price terms, the world鈥檚 best-known and most valuable cryptocurrency has climbed from around $29,000 at the start of the year to a fresh all-time high of nearly $70,000, and in the process reached a market cap of more than $1 trillion for the first time.

Subscribe to the 附近上门 Daily

Price, however, has only been one part of the story.

Institutional adoption and mass recognition

Setting aside the matter of price for a moment, 2021 was Bitcoin鈥檚 most important year to date, not least due to rising institutional adoption and increased mainstream recognition.

Following the playbook of 鈥檚 outspoken CEO , who continued to strengthen the company鈥檚 Bitcoin position via a series of convertible note offerings, this year saw add 鈥渄igital gold鈥� to the balance sheet of and , as well as establish his own personal position.

Elsewhere, the crypto asset witnessed increasing endorsement from some of the world鈥檚 most successful investors and hedge fund managers. Endowment funds, insurance companies, banks and payment processors like all ramped up their investments or service offerings, reversing a previous skeptical stance on the new asset class in the wake of regulatory clarity on custody and a macro environment of rampant money printing.

Ben Caselin, head of research and strategy at , a leading crypto exchange, notes on the matter: 鈥淲e鈥檙e seeing the adoption of Bitcoin by institutions and even countries. As the asset class grows in market cap and sophistication, those who dismissed it before due to its small size are now forced to reconsider their assessment. never supported Bitcoin, until they had to. It will be no different with hedge funds, sovereign wealth funds, central banks, and governments. Anyone who expects continued growth is able to buy Bitcoin or place it on their balance sheets, and that is exactly what has been happening in 2021.鈥�

Traditional financial instruments providing exposure to Bitcoin, such as the CME鈥檚 futures contracts, grew significantly, and 鈥檚 GBTC product attracted plenty of investment in the early part of the year. This ultimately led to the approval of the oft-mooted Bitcoin ETF by the , albeit futures rather than spot-based.

And of course, who could forget El Salvador breaking the mold by becoming the first nation to make Bitcoin legal tender? In leveling-up the game theory of Bitcoin as a monetary standard, and just recently outlining a volcano-powered, tax-free Bitcoin City, El Salvador鈥檚 bold leader allowed the country to break free from outsourced control of dollarization and immediately enhanced the country鈥檚 $6 billion remittance market.

Paradoxically, the best thing to happen to Bitcoin in 2021 might have actually been the source of extreme fear, uncertainty and doubt () at the time.

The China ban

It feels like there has been a Chinese Bitcoin ban of some description for every year of the asset鈥檚 existence, and in May 2021, the latest and arguably final target was Bitcoin mining. And it came at a bad time. Elon Musk had gone from Bitcoin hero to villain, u-turning on Tesla鈥檚 prior decision to accept BTC as payment for its vehicles, citing concerns that mining was harmful to the environment. FUD seized the market as mainstream media gratefully jumped on the narrative.

While many blamed Musk, it was the China ban doing the real damage. Bitcoin miners were forced to power down all over China and either liquidate their businesses or decamp to friendlier jurisdictions. In tandem with an environment of fear and over-leveraged derivative positions, the price of Bitcoin over the summer months as the global hash rate dropped by .

The result was not only the end of China鈥檚 once-dominant Bitcoin mining position鈥攔eportedly constituting over half of the global hash power鈥攂ut its near eradication.

China out, US in

As the subsequent recovery in both price and hash rate demonstrated, Bitcoin simply doesn鈥檛 care. Undeterred, it continued to add blocks and serve millions of users disillusioned with the fiat standard. This latest ban, it was soon clear, was a huge geopolitical misstep by the Chinese Communist Party.

China鈥檚 crackdown forced greater global decentralization of mining operations, with miners relocating to places like the U.S., Kazakhstan, Canada and Russia. It also removed the largest share of the global hash rate out of an authoritarian regime with potential for confiscation, and destroying historical anti-Bitcoin arguments centered around China鈥檚 share and supposed control of the market.

In a matter of months, the U.S. became the new dominant Bitcoin mining location, according to figures from the . Amazingly, had handed over a sizable share of this rapidly expanding industry to China鈥檚 greatest geopolitical rival.

The fact that so much mining infrastructure was shipped into the U.S. from China, alongside well-established existing operations on a more environmentally friendly grid profile, provided a major institutional acceptance boost to Bitcoin, helping to pave the way for a long-anticipated ETF approval.

Ironically, it also brought the wasteful energy narrative linked to the China ban full circle, with the likes of Saylor and Musk spearheading a renewable energy movement that is driving Bitcoin mining to be greener and cleaner. That鈥檚 despite it already having some of the compared to other industries, including the traditional banking system.

Crossing the chasm?

As we close out 2021 and look ahead to 2022 and beyond, where is Bitcoin heading?

Time will tell, though 2022 is likely to deliver more of the same. Educational, custodial and regulatory clarity will bring in more institutional interest, including the huge pension fund market. More states and nation-states will probably start to follow at least part of the El Salvador playbook. And the elusive spot ETF may finally arrive for a Bitcoin market increasingly perceived as 鈥渕ade in the USA.鈥�

While regulatory approvals and institutional adoption bring in big money, awareness and growth, the resulting products run counter to the ethos of Bitcoin as peer-to-peer decentralized money. However, Bitcoin itself unlocks financial sovereignty for the individual that cannot be changed or controlled by such interests鈥攁s this year has clearly demonstrated.

What is perhaps more interesting is that with an (roughly doubling year on year), and recent reports suggesting it has reached levels as high as in the U.S., Bitcoin is crossing the chasm into the early majority phase, on track to reach mainstream adoption of 1 billion users by 2025.

is a blockchain security consultant, helping organizations with data structures. Jackson reports and writes opinions on the blockchain/crypto space. He previously wrote about CBDCs, NFTS and crypto regulation for 附近上门 News.

Illustration: