Bitcoin Reviewed: January

A big month for digital assets as prices drop but adoption increases

A January decline

Bitcoin ended the year of 2021 a little above $46,000. There was bullish talk for the last two months of the year, after Bitcoin hit its all time high in early November. The leading digital asset saw a continuing decline throughout January, reaching a month low of $33,495 on January 24. The price has recovered from the low and now sits above $38,000.

During January, almost all of the digital asset market saw a decrease in price and market cap across the board. Geopolitical events such as the Russia-USA Ukraine tensions had a negative effect on global markets. Kazakhstan, a key country for Bitcoin mining, faced national protests that saw nationwide power outages. There is lots of talk about the Fed raising interest rates, which negatively affects the stock market, and in turn Bitcoin price.

Adoption increasing

Although Bitcoin’s price has been underwhelming for the start of 2022, it has seen continued adoption. MicroStrategy added to their already large Bitcoin portfolio by once again “buying the dip”. Michael Saylor announced on Twitter that MicroStrategy had purchased an additional 660 Bitcoin for a total of $25 million. The company now owns an impressive 125,051 BTC.

An Arizona State Senator, Rep. Wendy Rogers introduced a bill numbered SB 1341, that would make Bitcoin legal tender. Rogers is an avid supporter of Bitcoin, tweeting earlier today, “#Bitcoin will never close your account.” This started in September last year when the senator tweeted that she wanted to make Arizona a more crypto-friendly state. 

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The coinage clause of the United States constitution states that congress has the sole power to coin money in the United States. That’s where this bill gets tricky. Those who are “originalists” and view the constitution exactly as it is written have a potential problem with this law being passed, as Bitcoin is a decentralized asset that is not distributed by any individual entity. On the other hand, there are “modernists” who believe that the constitution should be adaptable with changing times, and can make a sound argument for SB 1341 being constitutional. It will be interesting to see how this plays out, because it will set a political precedent for how the federal government deals with Bitcoin legislation and regulation.

Will other nations follow in El Salvador’s footsteps?

El Salvador’s President, Nayib Bukele, accumulated more Bitcoin for his country’s treasure in January. The IMF expressed their concern in El Salvador’s Bitcoin accumulation and urged them to remove Bitcoin as legal tender because of its “volatility”. Bukele has been an increasingly big proponent of Bitcoin over the last few months. He often tweets about the digital asset, sometimes in a poignant and acerbic way. He has garnered a large amount of support from Bitcoin’s online community, specifically on Twitter.

India made two major announcements earlier Tuesday. After talk of banning cryptocurrency entirely, the country has now announced plans to tax cryptocurrency income at a rate of 30 percent. The second announcement was the county plans to announce their own digital rupee, controlled by the Indian central bank, in the coming years. It is important to note that a digital currency controlled by the central bank of a government is fundamentally different from a digital asset like Bitcoin. Bitcoin is decentralized, meaning no central organization has control over the asset. India will launch the digital rupee at least partially using blockchain technology. However, the details are still largely unclear on how the centralized digital asset will function on a technical level.

Increased regulation and tax laws are a telltale sign that the adoption of crypto assets is increasing worldwide. Countries will go where the money is, and as digital assets continue to grow in adoption across industries and economies, governments will feel the pressure to follow suit. India has the sixth largest economy in the world, and them creating their own centralized digital currency is a big step. It is important to note that India is not counting out other decentralized crypto assets, but instead levying a hefty tax on them.

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Elijah Pollack is editor-in-chief of Modern Consensus. He has previously co-hosted the Audible podcast Extra Credit. Elijah has published work in the past for Book and Film Globe and The Observer.