What’s next: The year ahead promises to be a big one for exchanges. Coinbase has struggled to work with U.S. regulators, occasionally lashing out about what it sees as unfair treatment. Binance, the biggest, appears to be working toward a totally new geographic and regulatory setup. FTX and others are pursuing visible expansion strategies. Will they be able to cope with increasingly interested regulators?
Elon Musk’s ‘SNL’ Appearance
What happened: Such was the excitement in the crypto community about Musk’s May 9 appearance on “Saturday Night Live” that fans of the billionaire organized watch parties and sent Dogecoin to a record 73 cents. Only one problem: Expectations were, shall we say, a bit high. While Musk touted the token, he also called it “a hustle,” sending it quickly lower.
What’s next: Musk has proven able to move the prices of cryptocurrencies — maybe not every single time he tweets, but often. The fact that he can do so doesn’t necessarily argue that crypto is a robust asset class. Will he suck up as much of the oxygen in crypto next year as he has in 2021?
Mid-May Crypto Wipeout
What happened: Down more than 30%, then up more than 30% — that was Bitcoin on the spectacularly wild ride of May 19. The gyrations were fueled in part by Musk stunning the crypto community some days earlier when he said Tesla wouldn’t accept Bitcoin as a payment method out of concern over its energy usage, as well as concerns about a crackdown in China after the central bank issued a warning about virtual-currency risks on its website. Other cryptocurrencies had similar fates as billions of dollars of crypto longs were liquidated quickly, while exchanges from Coinbase to Binance experienced outages. It took Bitcoin about two months to recover.
What’s next: The more crypto works, and the better the systems around it work, the more people might feel comfortable getting in. Can the crypto world cut back on glitches in 2022? Meanwhile, environmental concerns will likely continue to be front and center. And it will be interesting to see whether China continues its crackdown as the country rolls out its digital yuan. The country has proven to be quite serious about it so far, with multiple edicts from different agencies including late-September declarations that crypto transactions are illegal and mining will be rooted out, making it hard to see how any crypto-related private enterprises can flourish there.
El Salvador Makes Bitcoin Legal Tender
What happened: El Salvador’s young and controversial President Nayib Bukele told an audience at the Bitcoin 2021 conference in Miami in early June that he planned to make the largest cryptocurrency legal tender in his country. Just a few days later, El Salvador’s congress approved a resolution with a supermajority to make it so. Three months later, the plan took effect. Now, Bukele is even floating the possibility of selling tokenized “volcano bonds” tied to Bitcoin.
What’s next: The ramifications of El Salvador’s decision are still playing out, with the International Monetary Fund and others concerned about the effect Bitcoin's volatility could have on things such as consumer protection and financial stability. One person who doesn’t appear concerned is Bukele, who’s been posting on Twitter about buying the dip when the price drops. El Salvador’s move has accelerated a conversation about crypto as legal tender for other countries. The crypto faithful have been touting this possibility, and the idea even played into a hack of India Prime Minister Narendra Modi’s Twitter account. But it’s still a new and potentially fraught path. On the other hand, many governments are looking into, and a few even started, central bank digital currencies, or CBDCs.
El Salvador just bought the dip!
150 coins at an average USD price of ~$48,670 #Bitcoin
— Nayib Bukele (@nayibbukele) December 4, 2021