What would you prefer: a deposit on a nice house in Melbourne, or one whole bitcoin? Well, right now, they’ll set you back about the same amount.
The well-known cryptocurrency is on a high, hitting $US122,000 ($186,000) on Wednesday, with eager investors buying in ahead of US President Donald Trump’s “crypto week”, where Republican lawmakers are attempting to pass a raft of pro-crypto legislation in a bid to cement the country as the “crypto capital of the world”.
Donald Trump is a staunch supporter of bitcoin and other cryptocurrencies.Credit: The New York Times
For many, bitcoin’s record rally feels like much of the same, with the digital currency being renowned for its volatility. However, true believers say this time it’s different, and a lot of that has to do with Trump signalling a virtuous new era for cryptocurrencies.
So what is bitcoin? Why has the price risen so much? And is it time to invest?
What is bitcoin?
Bitcoin was created in 2008 by an anonymous person, or group of people, known as Satoshi Nakamoto. Their vision was to create an electronic version of cash that would be secure, stable, trusted and trackable, all without the need for a central bank such as the Reserve Bank.
So, instead of being managed by a central financial institution and banks, bitcoin as a currency is decentralised, meaning it is operated by a network of thousands of computers across the world, each one working to verify, cross-reference and process transactions on the network.
These computers create a common record of all transactions on the network – known as the blockchain – which makes bitcoin extremely difficult to dupe or interfere with. It also means there is a public, immutable record of all bitcoin transactions, though buyers and sellers are completely anonymous.
Despite Nakamoto’s original vision of bitcoin replacing cash, these days the cryptocurrency is much more akin to a digital version of gold, as the network is far too expensive and slow to be able to use it as a legitimate cash replacement. Indeed, central banks around the world have said cryptocurrencies are unfit for everyday use, with RBA governor Michele Bullock saying it has “no role” in the Australian economy.
Investors originally saw bitcoin as a “safe haven” asset separated from the fluctuation of markets. However, recently, institutional investors have flocked to the asset class, with about 6 per cent of bitcoin being held in exchange-traded funds (ETFs).
RBA governor Michele Bullock has said bitcoin has “no role” in the Australian economy.Credit: Louis Trerise
Why is it rallying?
Bitcoin and other cryptocurrencies are notoriously volatile, with their valuation regularly falling or rising by thousands of dollars in mere minutes. However, the recent rally has been more sustained, thanks largely to the influence of Trump.
During his campaign, Trump made no secret of his support for cryptocurrencies, promising to make the US the “crypto capital of the world”. Once elected, he then enacted several policies to promote crypto, including establishing a strategic bitcoin reserve within US Treasury, and holding a crypto summit at the White House.
He also released his own Trump-branded cryptocurrency, which has a market capitalisation of $US1.9 billion.
Republicans are now attempting to pass three more crypto-friendly bills – The GENIUS Act, The Clarity Act and The Anti-CBDC Surveillance State Act – all of which will create a friendlier regulatory environment for crypto traders and companies, including clarifying when digital assets such as crypto tokens are considered securities or commodities.
Crypto advocates view these bills as the US government’s effective endorsement of the sector and a further legitimisation of bitcoin, despite widespread crime in the industry and real-world use cases for cryptocurrencies still few and far between.
How much has the price risen?
After bitcoin’s creation in 2008, you could buy one for just a few cents, with 10,000 bitcoin famously being used to buy two pizzas in early 2010. As of Wednesday afternoon, one bitcoin was worth about $185,000.
Since Trump’s election, the asset’s price has risen by almost $80,000, or 76 per cent.
Should you invest?
Obviously, the best time to have bought bitcoin was 2009 – and even then, you would have needed to conveniently forget about it until now. But is it still worth buying – even with its heady valuation?
“Yes, we think so,” says Justin Lin, investment strategist at ETF provider Global X. “2025 is shaping up to be a landmark year for bitcoin adoption. This year we’ve seen some serious signs that investors are starting to value the asset for its fundamental strengths rather than simply speculating on its price.
“We think bitcoin is on its way to becoming a portfolio staple across the world, and as adoption grows, price discovery will follow.”
Global X believes bitcoin will reach a valuation of $US200,000 by midway through next year. Much of this, Lin says, will be driven by traditional investors through bitcoin ETFs, with the current crop of crypto investors mainly consisting of younger, tech-savvy investors.
“By our calculations, only about 20,000 Australians have invested in ASX-listed bitcoin ETFs. That’s shockingly low compared to the US. We take it as a sign that our older investment community still has a lot of catching up to do,” he says.
How can you invest?
There are a number of online bitcoin exchanges that operate both internationally and in Australia. You can sign up to one and buy bitcoin or other crypto. Keep in mind that you don’t have to purchase a whole one – you can buy even a fraction of a coin.
These exchanges allow you to buy, sell and store your bitcoin, much like an online stockbroker such as CommSec. The bitcoin ETFs are becoming increasingly popular as a way for traditional investors to purchase the digital asset without having to make an exchange account, with the ETFs available to purchase the same way as any other ASX stock.
However, chief executive of investment firm VanEck Asia Pacific Arian Neiron said Australian investors seem less willing to invest in crypto than their US counterparts.
“[Australian] investors are more cautious about bitcoin exposure, particularly when there is price momentum based on sentiment,” he says.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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