Bitcoin Approaches $100,000 Threshold Amid Continuing Post-Election Surge

NEW YORK (AP) — Bitcoin surged above $98,000 for the first time on Thursday, continuing its remarkable ascent with nearly daily all-time high records since the recent U.S. presidential election. In a mere two weeks, the cryptocurrency has soared over 40%.

With Bitcoin approaching the $100,000 milestone, many investors are seemingly undeterred by potential risks or the infamous volatility that has marked the cryptocurrency’s history.

The recent rally in cryptocurrencies, including a selection of related investments like crypto exchange-traded funds (ETFs), is largely attributed to expectations that the upcoming Trump administration will adopt a more favorable stance toward digital currencies compared to the outgoing Biden administration.

As of approximately 10 a.m. ET, Bitcoin was trading at $97,014 after hitting a high of $98,349, according to CoinDesk. However, the cryptocurrency market fluctuates wildly, making future predictions uncertain. While some analysts express optimism, others caution about inherent investment risks.

Understanding Cryptocurrency

Though cryptocurrency has existed for some time, it has gained significant attention in recent years. In simple terms, cryptocurrency is a type of digital currency designed to function through an online network without a central authority, meaning it usually lacks support from any government or banking institution. Transactions are recorded using a technology called blockchain.

Bitcoin, the oldest and largest cryptocurrency, has paved the way for other popular assets like Ethereum, Tether, and Dogecoin. While some investors view cryptocurrency as a modern alternative to traditional currency, it can be highly unpredictable, as its price is subject to broader market influences.

The Reasons Behind the Crypto Surge

A significant factor contributing to the recent spike in cryptocurrency values is the outcome of the U.S. presidential election. The market witnessed some momentum leading up to the election, but the sharp rise that occurred in the weeks following suggests that the cryptocurrency market may not have fully anticipated a Republican victory, according to analysts from Kaiko in their November 14 research note.

Key players in the cryptocurrency space have welcomed Trump’s reelection as they hope he will facilitate regulatory and legislative changes that have long been advocated for. Generally, the industry is seeking legitimacy while also hoping to avoid excessive regulation.

Trump, who once expressed skepticism regarding cryptocurrencies, recently declared his intention to make the U.S. “the crypto capital of the planet” and proposed the establishment of a “strategic reserve” of Bitcoin. His campaign even accepted donations in cryptocurrency, and he made an appearance at a bitcoin conference in July. Additionally, Trump launched World Liberty Financial, a venture aimed at trading cryptocurrencies alongside his family members.

Moreover, he promised to remove Gary Gensler, the current chair of the Securities and Exchange Commission, known for advocating for more stringent regulations in the crypto industry. The actual implementation of these plans remains uncertain. David Glass, a macro strategist at Citi, raised important questions about whether future regulation will be enforcement-driven, as seen historically, or will stem from new legislation.

“This is not necessarily a short-term story; it is likely to unfold over a much longer term,” Glass remarked to The Associated Press. “Moreover, it raises the question of how quickly U.S. crypto policy can make a tangible impact on broader adoption.”

For several months, digital assets like Bitcoin have consistently gained value, aided by the successful introduction of spot Bitcoin ETFs, which began to receive approval from U.S. regulators in January. Analysts point out that these ETFs have been a critical driver for Bitcoin, particularly with substantial inflows observed post-election. According to Kaiko, Bitcoin ETFs alone generated $6 billion in trading volume during the week of the election.

In April, Bitcoin underwent its fourth “halving,” a pre-programmed event that halves the rewards for mining new Bitcoin. As the rewards decrease, the influx of new Bitcoins into the market is reduced. Some analysts believe that maintaining strong demand during this “supply shock” could potentially elevate the price over the long term; however, others argue that it remains too early to gauge the full impact.

Risks Linked to Cryptocurrency Investment

Investing in cryptocurrency is not without its dangers, as past experiences indicate that losses can occur just as quickly as gains. The long-term price movement of cryptocurrencies is largely influenced by wider market dynamics, with trading occurring around the clock, every day.

For context, at the onset of the COVID-19 pandemic, Bitcoin was priced over $5,000, surging to nearly $69,000 by November 2021 during a period characterized by substantial demand for technology investments. However, Bitcoin’s value plummeted during drastic Federal Reserve interest rate hikes aimed at controlling inflation. Furthermore, the collapse of FTX at the end of 2022 dealt a severe blow to overall confidence in cryptocurrencies, dragging Bitcoin down to below $17,000.

Recently, as inflationary pressures have eased, investors have returned en masse, and gains have skyrocketed due to the burgeoning interest in spot ETFs. Nonetheless, experts continue to urge caution, especially for smaller investors.

Environmental Considerations

The process of producing assets like Bitcoin, known as “mining,” requires a substantial amount of energy and often relies on environmentally harmful sources, raising significant sustainability concerns.

Recent research from the United Nations University and Earth’s Future journal revealed that Bitcoin mining in 2020-2021 across 76 countries generated a carbon footprint equivalent to the emissions produced by burning 84 billion pounds of coal or operating 190 natural gas power plants. The majority of Bitcoin’s electricity needs (45%) were met by coal, followed by natural gas (21%) and hydropower (16%).

Concerns regarding Bitcoin mining’s environmental impact largely depend on the energy sources used. Industry analysts have noted an increasing shift toward cleaner energy in recent years, which aligns with calls for enhanced climate protection.