Although Bitcoin is the most popular cryptocurrency, Ethereum is the one investors are following more. That is why it surpassed BTC this year, and this may continue in 2022.
The daily chart shows that Bitcoin, over the past five years, has been accelerating because of volatility. But after a peak in late 2017, it traded sideways.
Volatility tied to the presidential election gave it a boost, which then sped up as traders embraced risk after the first Covid vaccine arrived in early November 2020. For a while, Bitcoin showed a positive correlation with the S&P 500, emerging market securities and commodities as a measure of inflation. But after a 516% increase in yield in about six months, it stabilized.
Lately, Bitcoin experienced fewer fluctuations, for example, Tuesday's low volume would traditionally have triggered a major move, but Bitcoin fell just 6.7%, or less than two standard deviations. In the first half of the year, BTC crossed this threshold more than three times more often than in the second half, mainly due to retail-oriented trades and regulatory risks.
"A lot of traders have made life-changing money in 2021 and have been waiting to take profits until after the turn of the year to delay tax payments until 2023," said Sergio Silva, sales director at Fireblocks. "That's another source of selling pressure that could cascade into additional weakness in January."
At this point, Bitcoin's price movement seems to be more dependent on technical specifications. For example, the 200-day moving average provided support in December.
Still, the most notable gains this year have come from Ether, the token of the Ethereum network. It skyrocketed, thanks to the adoption of blockchain technology by financial technology companies and the popularity of non-fungible tokens (NFTs) in the world of art and games.
"It's not really that clear to the world at large, to the mainstream, that what's really happening with Bitcoin, with Ethereum, with this whole bucket of technologies...is really a revolution in software development," said Coinlist CEO Graham Jenkin. "Blockchain technology represents a totally new way to build, distribute and run software," he added.