Bitcoin hits $US100,000, lifted by hopes of a crypto-friendly Washington
The world’s largest digital currency has staged an extraordinary rally since the US election, surging more than 40 per cent in just four weeks and setting one record after another.
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Bitcoin traded above $US100,000 ($155,470) for the first time, powered by a wave of investors betting that President-elect Donald Trump will turn US government policy into an engine of growth for crypto.
The world’s largest digital currency has staged an extraordinary rally since Election Day, surging more than 40 per cent in just four weeks and setting one record after another. During the campaign, Trump dropped his earlier scepticism of bitcoin and promised to “end Joe Biden’s war on crypto.” In return, crypto has embraced the new US administration – a striking reversal from its early years as a cypherpunk rebellion against the establishment. No longer an outsider to political power, crypto is newly ascendant in Washington. Its march toward the mainstream has enriched a youthful cohort of digital-currency tycoons and swelled the value of the asset class to more than $US3 trillion.
“I find it very ironic,” said Tim Swanson, head of market intelligence at Clearmatics, a London-based blockchain company. “The whole purpose of bitcoin was to create an alternative payment infrastructure outside of traditional finance and government surveillance. Now some bitcoiners are looking to embrace governments, or even get subsidies.”
Satoshi Nakamoto, the pseudonymous creator of bitcoin, proposed it in 2008 as a way to make payments without relying on the traditional banking system. Many of bitcoin’s early fans were libertarians who saw it as a way to let individuals control their financial destinies, free from the oversight of nosy banks and governments.
Now, crypto investors are cheering Trump’s pledge to create a strategic national reserve for the government’s bitcoin holdings – a policy that could boost the price of the digital currency by absorbing supply. Trump has promised to ease the regulatory burden on the crypto industry. One of its main foes, Securities and Exchange Commission chair Gary Gensler, plans to resign on Inauguration Day. Trump had vowed to fire Gensler, who has warned that digital currencies are rife with fraud and manipulation.
Governments in Bhutan and El Salvador have also amassed stashes of bitcoin. So have some publicly traded companies, such as MicroStrategy and Tesla. Since bitcoin’s supply is limited — its algorithms impose a hard cap of 21 million coins, expected to be reached in around 2140 — the emergence of large hoards locking up available supply is bullish for bitcoin’s price.
Whatever policies Trump ends up implementing, his tone is a departure for the incoming leader of the US government. Officials in Washington have long viewed crypto warily, associating it with illicit activity and investment scams.
Congress is also more likely to pass legislation welcomed by the crypto industry, after crypto firms launched a wave of campaign spending to support friendly candidates and oust their critics. The effort helped topple lawmakers seen as hostile to the industry, such as Sen. Sherrod Brown.
In total, voters elected 298 pro-crypto representatives and senators, compared with 134 who are anti-crypto, according to a tally and ratings by Stand With Crypto, an advocacy group backed by Coinbase Global.
Bitcoin is practically never used today as a way to make payments – the original use envisioned by Nakamoto. Instead, proponents argue it is a form of “digital gold,” a way to store monetary value and hedge against inflation.
There is no guarantee that bitcoin, with its history of wild volatility, will retain its current high price level. Bitcoin has repeatedly hit records on signs of mainstream adoption, before collapsing. In 2017, the year when bitcoin first began to draw broad attention, it spiked to nearly $US20,000 after Chicago exchanges listed futures contracts on bitcoin.
In 2021, bitcoin hit a record of almost $US69,000 following the launch of exchange-traded funds holding bitcoin futures. From that peak, it plunged 78 per cent to less than $US16,000 after the collapse of Sam Bankman-Fried’s crypto exchange FTX in November 2022.
Bitcoin broke through into record territory again in March of this year, after the launch of “spot” ETFs that hold bitcoin itself. Such funds have been a popular way for investors to play the recent Trump-fuelled rally. Since Election Day, they have poured more than $US7bn into US spot bitcoin ETFs, according to Morningstar Direct. The inflows have helped drive bitcoin higher.
Holding bitcoin through ETFs is yet another departure from the origins of crypto. Early bitcoin holders could only access their coins and use them in transactions by typing in cryptographic keys — long strings of letters and numbers. After the rise of exchanges such as Coinbase, which held people’s bitcoin and provided an easy-to-use interface, some hardcore crypto fans scoffed at their users with the expression “not your keys, not your coins.”
With spot bitcoin ETFs, investors are effectively letting Wall Street hold coins on their behalf, in exchange for the convenience of using the same traditional brokerage accounts they use to trade stocks and bonds. And many bitcoin proponents are comfortable with that.
“People will tend to follow the path of least resistance and greatest familiarity to investing in and holding bitcoin, which means utilising these traditional vehicles,” said Josiah Hernandez, founder and chief executive of Satoshi Capital Advisors.
“At the end of the day, it doesn’t have a significant negative effect on the underlying investment thesis of bitcoin for most people … that bitcoin is digital gold.”
The Wall Street Journal
Originally published as Bitcoin hits $US100,000, lifted by hopes of a crypto-friendly Washington
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