Bitcoin topped $98,000 for the first time on Thursday, continuing to set new highs almost every day since the U.S. presidential election. The cryptocurrency has soared more than 40% in just two weeks.
Bitcoin is currently nearing $100,000, and investors seem unfazed by warnings about gravity and volatility in the crypto’s history.
The incoming Trump administration is expected to be more “cryptocurrency friendly” than the outgoing Biden administration, leading to an increase in cryptocurrencies and related investments such as crypto exchange traded funds.
As of 11:02 a.m. ET, Bitcoin was trading at $96,747, after rising as high as $98,349, according to CoinDesk.
However, the cryptocurrency market remains a wild place and it is impossible to know what will happen next. While some experts are bullish, others warn of investment risks.
Here’s what you need to know:
Cryptocurrencies have been around for a while, but have gained attention in the last few years.
Basically, cryptocurrencies are digital money. This type of currency is designed to function through an online network without a central authority, meaning it is usually not backed by a government or banking institution, and transactions are recorded on a technology called blockchain.
Bitcoin is the largest and oldest cryptocurrency, but other assets such as Ethereum, Tether, and Dogecoin have also grown in popularity over the years. Some investors consider cryptocurrencies to be “digital alternatives” to traditional money, but prices can be highly volatile as they depend on larger market conditions.
Trump’s election victory accelerates virtual currency market
Many of the recent actions are US election results.
President-elect Donald Trump, who has been critical of digital currencies, swore during the election campaign He opposed Vice President Kamala Harris’ plan to make the United States the “crypto capital of the planet” and create a “strategic reserve fund” for Bitcoin. His campaign accepts donations in cryptocurrencies and appealed to fans at a Bitcoin conference in July. He also launched a new business, World Liberty Financial, to trade cryptocurrencies with his family.
Crypto industry insiders welcomed Trump’s victory and hope that he will push through long-sought legal and regulatory changes. Trump also promised to fire Securities and Exchange Commission Chairman Gary Gensler, who led the U.S. government’s crackdown on the cryptocurrency industry and has repeatedly called for stronger oversight, if elected.
Spot Bitcoin ETF
Digital assets like Bitcoin posted a notable rally in the months leading up to the election, largely due to the early success of new ways to invest in assets. spot bitcoin ETF, These were approved by US regulators in January.
Spot Bitcoin ETFs allow investors to gain direct exposure to Bitcoin without owning any Bitcoin. Unlike a regular Bitcoin ETF, whose underlying asset is a Bitcoin futures contract, the underlying asset of a Spot Bitcoin ETF is Bitcoin. Each Spot Bitcoin ETF is managed by a company that issues shares of its Bitcoin holdings purchased through other holders or through licensed crypto exchanges. Shares are listed on traditional stock exchanges.
Citi analysts David Glass and Alex Saunders wrote in a research note two weeks ago that spot ETF inflows “have been the primary driver of Bitcoin returns for some time, and this relationship is likely to be short-lived. I expect it to continue.” They added that spot crypto ETFs saw their largest inflows on record in the days following the election.
Bitcoin volatility
History has shown that with cryptocurrencies, you can lose money quickly after making money. Long-term price trends depend on larger market conditions. Trading takes place at any time of the day.
At the beginning of the coronavirus disease (COVID-19) pandemic, the price of Bitcoin was just over $5,000. Its price rose to nearly $69,000 by November 2021 as demand for technology assets increased. Bitcoin then crashed during the Federal Reserve’s series of aggressive interest rate hikes aimed at curbing inflation. The collapse of FTX in late 2022 severely eroded confidence in cryptocurrencies as a whole, sending Bitcoin below $17,000.
As inflation began to subside, many investors began returning. Profits soared On the promise of spot ETFs and their subsequent early success. Experts still emphasize caution, especially for investors with little money.
How Bitcoin mining works
Assets like Bitcoin are generated through a process called “mining” that consumes large amounts of energy. And operations that rely on polluting sources have been of particular concern for years.
A recent study published by United Nations University and Earth’s Future Journal found that the carbon footprint of Bitcoin mining in 2020-2021 across 76 countries was equivalent to burning 84 billion pounds of coal or burning 190 natural gas-fired power plants. It was found that the emissions are comparable to those caused by operation. Coal meets the majority (45%) of Bitcoin’s electricity needs, followed by natural gas (21%) and hydropower (16%).
The environmental impact of Bitcoin mining primarily comes down to the energy source used. Industry analysts argue that the use of clean energy has increased in recent years, coinciding with growing calls for climate protection.
