Bitcoin tops $100K as Trump win sparks cryptocurrency’s surge

Bitcoin has surged past the $100,000 mark, driven by a significant rally triggered by Donald Trump’s election. This dramatic increase comes just hours after the President-elect suggested a softer approach to cryptocurrency regulation, announcing his intent to nominate Paul Atkins, a known crypto advocate, as the next chair of the Securities and Exchange Commission (SEC).

The world’s largest cryptocurrency has seen a meteoric rise since Trump won the election on November 5. Bitcoin’s value has climbed from $69,374 on Election Day to a staggering $103,713 by Wednesday, according to CoinDesk. It’s a remarkable shift, especially considering that just two years ago, Bitcoin plunged below $17,000 in the aftermath of the FTX exchange collapse.

How long Bitcoin will maintain this $100,000 milestone remains uncertain. Early Thursday, it fell back slightly to under $102,000. The future of cryptocurrency is famously unpredictable, and while some are optimistic about continued growth, many experts remain cautious and emphasize the investment risks. Here’s a detailed breakdown of what’s happening.

Back to Basics: What is Cryptocurrency?

Cryptocurrency has been around for some time, but it’s only in recent years that the term has entered mainstream conversations. Simply put, cryptocurrency is a form of digital money. This digital currency operates over an online network without the oversight of any central authority, such as a government or banking institution. Instead, transactions are recorded on a blockchain, a type of decentralized ledger technology.

Bitcoin is the largest and oldest cryptocurrency, but others like Ethereum, Tether, and Dogecoin have gained popularity too. For some investors, cryptocurrency represents a “digital alternative” to traditional money. Despite its rising popularity, the vast majority of everyday financial transactions still use fiat currencies like the US dollar. Moreover, Bitcoin is notoriously volatile, and its value fluctuates based on broader market conditions.

Why is Bitcoin Surging Now?

Much of the recent action is directly tied to the outcome of the US presidential election. Trump, who was initially skeptical about cryptocurrencies, has taken a dramatic turn in his stance, pledging to make the US “the crypto capital of the planet.” He also vowed to create a “strategic reserve” of Bitcoin. His campaign accepted cryptocurrency donations, and he notably courted supporters at a Bitcoin conference in July. Trump even launched a venture named World Liberty Financial with family members to trade cryptocurrencies.

The crypto industry has embraced Trump’s victory, hoping for positive changes in legislation and regulation that could foster legitimacy while avoiding excessive red tape. On Wednesday, Trump took steps in this direction by announcing his intention to nominate Paul Atkins as chair of the SEC. Atkins, who served as SEC commissioner during George W. Bush's presidency, has long been an advocate against over-regulation. After leaving the SEC, Atkins joined the Token Alliance, a group supporting cryptocurrencies, in 2017.

Under the current SEC chair, Gary Gensler, the commission has been strict with the crypto industry, penalizing multiple companies for violating securities laws. Gensler has faced criticism from within the industry, with the chief legal officer of Robinhood calling his approach towards crypto “rigid” and “hostile.” Gensler will step down when Trump assumes office.

One significant move the SEC made under Gensler was approving spot Bitcoin ETFs (exchange-traded funds) in January. These funds allow investors to gain exposure to Bitcoin without directly purchasing it. Spot ETFs were a major factor behind Bitcoin’s price surge before the election and saw record investment following the election results.

The Risks Involved

Cryptocurrencies can be unpredictable, and the potential for loss is as high as the chance for profit. Bitcoin’s long-term price behavior depends heavily on broader market conditions, and trading occurs continuously, with no respite, making it a 24/7 high-stakes game.

When the COVID-19 pandemic began, Bitcoin's value was just over $5,000. It shot up to nearly $69,000 by November 2021 amid a surge in demand for tech assets, but it later crashed during a series of aggressive interest rate hikes by the Federal Reserve. The collapse of the FTX exchange in late 2022 also severely damaged confidence in crypto, with Bitcoin falling below $17,000.

However, investors began returning in large numbers as inflation started to cool, and gains accelerated with the introduction of spot ETFs. Despite the recent surge, experts advise caution, particularly for investors with limited resources. The expected deregulation under Trump’s administration might mean fewer protective measures for small investors.

“I would say, keep it simple. And don’t take on more risk than you can afford to,” said Adam Morgan McCarthy, a research analyst at Kaiko. He emphasized that there's no “magic eight ball” for predicting the future of Bitcoin.

The Environmental Impact of Bitcoin

The production of assets like Bitcoin relies on a process called mining, which is highly energy-intensive. Mining operations that depend on polluting energy sources have been a growing environmental concern.

Recent research by the United Nations University and the Earth’s Future journal highlighted that Bitcoin mining in 2020-2021 generated a carbon footprint equivalent to burning 84 billion pounds of coal or running 190 natural gas power plants. A significant portion of Bitcoin’s electricity needs are met by coal (45%), followed by natural gas (21%) and hydropower (16%).

The environmental effects of Bitcoin mining largely depend on the source of energy used. Some industry analysts claim that the use of clean energy in mining has increased in recent years, aligning with the rising global demand for environmental protection measures.