Bitcoin is surging after US President-elect Donald Trump’s announcement of a more lenient approach in regulating cryptocurrencies.
On the Binance exchange, the price of bitcoin exceeded the $100,000 mark for the first time. The leader of the cryptocurrency market began to rise in price immediately after Trump’s presidential victory, writes euronews.com.
On Wednesday, the president-elect voiced a more moderate position on regulation in the cryptosphere, and also expressed his intention to appoint cryptocurrency advocate Paul Atkins as chairman of the Securities and Exchange Commission (SEC).
Bitcoin has hit record highs since Trump won the election on Nov. 5. According to CoinDesk, the cryptocurrency’s value rose from$69,374 (€65,833, 48) on Election Day to$103,713 (€98,386, 82) by Wednesday. By comparison, just two years ago, the price of bitcoin fell below$17,000 (€16,131, 21) after the collapse of the FTX exchange.
For now, it remains unclear how long Bitcoin will be able to hold above$100,000. Already on Thursday morning, its exchange rate was already down, falling slightly below$102,000 (€96,789, 35). As with all volatile cryptocurrencies, predicting its future value remains a challenge. Some investors are optimistic, while others continue to warn of the risks of such investments.
Here’s the key information you need to know.
What is a cryptocurrency?
Although cryptocurrency has been around for quite some time, its popularity has increased markedly in recent years.
In its essence, cryptocurrency is a digital form of money. Such currency is designed to function on the internet without the involvement of central authorities, which implies its independence from any government or banking system. All transactions are recorded using blockchain technology.
Bitcoin is the first and largest cryptocurrency, but other digital assets such as ether, device and dog have also gained significant attention over the years. Although some investors view cryptocurrency as the “digital equivalent” of fiat money, most daily transactions are still done in domestic currencies such as the dollar. That said, the value of Bitcoin is highly volatile, subject to changes in market factors.
Why is bitcoin growing so fast?
The main reasons for the current surge are related to the results of the US presidential election.
Donald Trump, who previously expressed skepticism about cryptocurrencies, announced his intention to turn the U.S. into the “cryptocurrency capital of the world” and create a “strategic reserve” of bitcoin. His campaign accepted cryptocurrency donations, and he himself spoke to supporters at a Bitcoin conference in July. He also launched World Liberty Financial with members of his family, focusing on crypto trading.
Crypto industry representatives were enthusiastic about Trump’s victory, expecting his administration to make long-awaited regulatory changes that would increase trust in cryptocurrencies without creating excessive bureaucracy.
On Wednesday, Trump took a step toward fulfilling his promises by announcing plans to nominate Paul Atkins to head the SEC. Atkins, who served as SEC commissioner under George W. Bush Jr. is known for his criticism of excessive market regulation. In 2017, he joined the Token Alliance, an organization that supports cryptocurrencies.
Unlike Atkins, current SEC Chairman Gary Jansler has taken a hard line on cryptocurrencies, actively fining companies for securities law violations. However, his approach has drawn criticism from members of the industry, including Robinhood’s general counsel, who characterized Jensler’s actions as “aggressive” and “hostile.” Jensler is expected to step down after Trump’s inauguration.
One of the few cryptocurrency-friendly SEC decisions under Jensler was the approval of spot bitcoin ETFs in January, which allow investors to own shares in bitcoins without directly buying them. Before the presidential election, spot ETFs were already having an impact on the bitcoin exchange rate, but they have attracted record investment since the election results.
What are the risks?
History shows that you can make money on cryptocurrency as quickly as you can lose it. Long-term price dynamics depend on general market conditions. Trading is conducted around the clock.
During the start of the COVID-19 pandemic, bitcoin was worth just over$5,000 (€4744, 58). By November 2021, its price had reached almost $69,000 (€65475, 15), coinciding with the peak of interest in technology assets. However, then due to a series of sharp interest rate hikes by the Federal Reserve, the value of the cryptocurrency plummeted. The crash of FTX at the end of 2022 further weakened confidence in the industry, dropping the bitcoin price below $17,000.
Investors have started to come back amid lower inflation and expectations of spot ETF launches. However, experts continue to recommend caution, especially for those with limited financial resources. In addition, the expected easing of regulations under the Trump administration may entail lower safeguards.
“My advice is to remain realistic. Don’t take on more risk than you are willing to bear,” said Adam Morgan McCarthy, an analyst at Kaiko. He emphasized that there is no “crystal ball” to accurately predict the future.
How do cryptocurrencies affect the environment?
Assets such as bitcoin are produced using a mining process that requires a colossal amount of energy. The environmental impact due to these activities has been a concern for many years.
A study conducted by UN University and Earth’s Prospect magazine found that the carbon footprint of bitcoin mining in 76 countries between 2020 and 2021 was comparable to the emissions of 190 natural gas-fired power plants. Coal accounted for the largest share of energy consumption (45%), followed by natural gas (21%) and hydropower (16%).
The environmental threat from mining depends on which energy source is used. Industry analysts emphasize the increased use of clean energy in recent years.