Bitcoin has crossed the $100,000 mark as the massive rally in the world’s most popular cryptocurrency sparked by the election of Donald Trump continues.
The milestone comes just hours after the president-elect signaled a lighter regulatory approach to the cryptocurrency industry when he said he intends to nominate cryptocurrency advocate Paul Atkins to be the next chairman of the Securities and Exchange Commission.
Bitcoin has risen to unprecedented levels since Trump won the election on November 5. The cryptocurrency skyrocketed from $69,374 on Election Day and rose to $103,713 on Wednesday, according to CoinDesk. Just two years ago, Bitcoin fell below $17,000 after the collapse of cryptocurrency exchange FTX.
It is uncertain how long Bitcoin will remain above the $100,000 mark. It fell to just under $102,000 early Thursday. As with everything in the volatile world of cryptocurrencies, it is impossible to predict the future. While some are optimistic about future gains, other experts continue to warn of investment risks.
Here’s what you need to know.
Backup. What is cryptocurrency again?
Cryptocurrency has been around for a while. But you’ve probably been hearing about it more and more over the past few years.
In basic terms, cryptocurrency is digital money. This type of currency is designed to operate through an online network without a central authority – meaning it is not typically backed by any government or banking institution – and transactions are recorded using a technology called blockchain.
Bitcoin is the largest and oldest cryptocurrency, although other assets such as Ethereum, Tether, and Dogecoin have also gained popularity over the years. Some investors see cryptocurrency as a “digital alternative” to traditional money, but the vast majority of daily financial transactions are still conducted using fiat currencies such as the dollar. Additionally, Bitcoin can be very volatile, with its price depending on larger market conditions.
Much of the recent action is tied to the outcome of the US presidential election.
Get weekly money news
Get expert insights and Q&As on markets, housing, inflation and personal finance information delivered to you every Saturday.
Trump, previously a crypto skeptic, has pledged to make the United States the “cryptocurrency capital of the planet” and create a “strategic reserve” of bitcoin. His campaign accepted donations in cryptocurrency, and he courted fans at a bitcoin conference in July. He also launched World Liberty Financial, a new venture with family members to trade cryptocurrencies.
Cryptocurrency industry players welcomed Trump’s victory, hoping that he can move forward with the legislative and regulatory changes they have long pushed for — which, in general, aim to increase a sense of legitimacy without a lot of red tape.
Trump took a step in that direction on Wednesday when he said he intends to nominate Paul Atkins to head the Securities and Exchange Commission. Atkins was commissioner of the Securities and Exchange Commission during the presidency of George W. Bush. In the years since leaving the agency, Atkins has championed much market regulation. He joined the Token Alliance, a cryptocurrency advocacy organization, in 2017.
Under current Chairman Gary Gensler, the SEC has cracked down on the cryptocurrency industry, imposing penalties on a number of companies for violating securities laws. But he also faced criticism from industry players in the process, such as Robinhood’s chief legal officer, who called Gensler’s approach to cryptocurrencies “aggressive” and “hostile.” Gensler will step down when Trump takes office.
One of the SEC’s cryptocurrency-friendly moves under Gensler was its approval in January of bitcoin exchange-traded funds, or exchange-traded funds, which allow investors to take a stake in bitcoin without buying it directly. Spot ETFs were the dominant driver of Bitcoin’s price before the election — but, like much of crypto’s recent momentum, saw record inflows after the election.
History shows that you can lose money in cryptocurrencies just as quickly as you make it. Long-term price behavior depends on larger market conditions. Trading continues at all times, every day.
At the beginning of the COVID-19 pandemic, the price of Bitcoin was just over $5,000. Its price rose to nearly $69,000 by November 2021, during a surge in demand for technology assets, but later collapsed during an aggressive series of interest rate hikes by the Federal Reserve. The collapse of FTX in late 2022 undermined confidence in cryptocurrencies generally, with Bitcoin falling below $17,000.
Investors began returning in droves as inflation began to ease – and gains skyrocketed as a result of expectations and then the early success of spot ETFs. But experts still stress caution, especially for investors with small pockets. Ease of regulation by the incoming Trump administration may mean fewer guardrails.
“I would say, keep it simple. Don’t take more risks than you can afford,” said Adam Morgan McCarthy, a research analyst at Caico, adding that there is no “magic eight ball” to know with certainty what comes next.
What about climate impact?
Assets like Bitcoin are produced through a process called “mining,” which consumes a lot of energy. Operations that rely on polluting sources have raised particular concerns over the years.
Recent research published by the United Nations University and Earth’s Future magazine found that the carbon footprint of Bitcoin mining in 2020-2021 across 76 countries is equivalent to the emissions from burning 84 billion pounds of coal or operating 190 natural gas-fired power plants. Coal meets the bulk of Bitcoin’s electricity needs (45%), followed by natural gas (21%) and hydropower (16%).
The environmental impacts of Bitcoin mining largely boil down to the energy source used. Industry analysts confirm that the use of clean energy has increased in recent years, coinciding with increasing calls for climate protection.
