After what can only be described as a thrilling end of 2020 for Bitcoin, the digital currency started 2021 with a bang. The cryptocurrency climbed to start the year, peaking above $64,000 by mid-April, following a strong first quarter. Promises of seemingly never-ending liquidity from the Federal Reserve gave markets — both crypto and stocks — unbridled optimism.
After this auspicious start to the year, there seemed to be only one place to go: down. In May, China warned cryptocurrency buyers that it was going to put pressure on the industry, and the price of Bitcoin began to drop. The country also announced that it was prohibiting financial institutions and payment platforms from transacting in cryptocurrency.
This news helped throw Bitcoin into a tailspin, where it quickly lost more than 50 percent of its value within a few months.
Later, in September, China announced that all cryptocurrency transactions were illegal and that even foreign websites offering such services to Chinese traders were prohibited. The market shrugged off that news, and by October the currency was back over $60,000 and on its way to a new all-time high, at $68,789, on Nov. 10, 2021.
Late in 2021, the Federal Reserve announced that it would begin to taper its bond purchases, slowly draining liquidity from financial markets. With inflation roaring at multi-decade highs, the central bank wanted to tamp down rising prices. The 10-year Treasury rate began to rise, as investors began pricing in the prospect that the Fed would raise interest rates in the near future.
The prospect of less liquidity in the market threw risky assets such as high-growth stocks for a loop, and cryptocurrencies and Bitcoin followed along, starting in early November.
That malaise continued into 2022, as rising inflation and a central bank intent on raising rates to thwart it, drove investors from risky assets. Bitcoin bounced around the $40,000 mark for months, but as the Fed started to aggressively raise interest rates in March, it began to sink. In mid-2022, Bitcoin established a new trading range of around $20,000 but then sank to less than $16,000 as high-profile blow-ups such as FTX hurt traders’ confidence.
The price picked up in 2023, gaining more than 50 percent through mid-June, amid a broader rally in tech stocks. Bitcoin traded for around $26,000 as of mid-June 2023 despite a crackdown by the Securities and Exchange Commission on the crypto industry. It bounced around but was still near $27,000 by late September, before it began to break higher to end the year.
As interest rates seemed to be peaking in October 2023, Bitcoin started rising again. It ran to more than $42,000 to close out the year, amid rumors that the SEC would finally allow the creation of Bitcoin ETFs.
