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Highlights
- Bitcoin experienced some Christmas cheer, jumping US$3,000 on December 24 to hit US$51,500 where it hovered throughout Christmas Day and Boxing Day
- Bitcoin’s capacity as a store value will be tested in 2022 as inflation increases and becomes a concern for the US and global economies
- In the US, the Biden administration are currently looking to establish new rules to govern the crypto industry
Any hopes Bitcoin investors had of an end-of-year rally were put to bed yesterday when the world’s largest cryptocurrency took a six percent dive.
The drop takes Bitcoin to a tad below US$48,000 and continues the coin’s decline since hitting a record high on November 11 of US$68,500.
The question on the minds of investors right now is: How low will Bitcoin fall?
The Christmas Recovery
Bitcoin experienced some Christmas cheer, jumping US$3,000 on December 24 to hit US$51,500 where it hovered throughout Christmas Day and Boxing Day.
The price actually rose as high as US$52,000 on December 28 before a marked drop of over US$4,000 to hit just below US$48,000.
Ethereum’s price followed a similar trajectory jumping to above US$4,100 on December 24 and hovering there until December 28 when the second largest crypto by market cap plummeted to around US$3,800, where it sits at the time of writing.
What’s In Store For 2022?
Bitcoin’s capacity as a store value will be tested in 2022 as inflation increases and becomes a concern for the US and global economies.
In 2021, the US inflation rate rose to 6.8%, which is the highest rate since 1982. Although the 6.8% figure is across all sectors, some saw much more significant increases, including gas, which rose an astonishing 58%, according to a report by the Bureau of Labor Statistics.
While the high inflation rate has become a point of criticism for those against the current US administration, the White House contends that the high rate is only temporary and a result of the pandemic.
Be that as it may, Bitcoin’s testing as a store of value, or “digital gold” as it’s often touted, seems to have remained unrealised, given the coin’s plummeting value over the November and December period.
Image source © Designer491 | Megapixl.com
Regulatory Impacts on Bitcoin
Possibly, a factor which has offset Bitcoin’s potential as a protection against rising inflation, has been the development of inflation legislation imposed by nations across the globe.
In the US, the Biden administration are currently looking to establish new rules to govern the crypto industry.
In November, the US government passed a US$1.2 trillion bipartisan infrastructure bill, which included some regulation surrounding crypto. In the bill, a new law requires brokers (aka crypto exchanges) to directly notify the IRS of any crypto transactions.
Whereas the prior laws viewed crypto as taxable property, the new bill requires investors to accurately report any earnings they may have gained through crypto. This has seemed to spook many investors who sold off their holdings in the wake of the bill’s passing.
Whether the effects of the selloff have ceased or whether further regulation will result in further selloffs, remains to be seen.
