Bitcoin soared to a new record, briefly reaching $89,995 early Tuesday before settling around $88,288 by 5 p.m. ET, marking a 27% increase in the past week, the Associated Press reports.
The world’s largest cryptocurrency continues its rally following the reelection of Donald Trump, with crypto advocates anticipating a “crypto-friendly” administration that could bring regulatory clarity and support for the industry.
Trump’s victory is viewed as a turning point for cryptocurrency, which rallied throughout Election Day as the outcome became clear. Although he had previously expressed skepticism about digital assets, Trump changed his stance during the campaign, pledging to transform the US into “the crypto capital of the planet.” His commitments include creating a “strategic reserve” of bitcoin, removing current Securities and Exchange Commission (SEC) chair Gary Gensler, and reducing regulatory hurdles that many in the industry see as restrictive.
The optimism has already translated into massive inflows to spot bitcoin ETFs, which analysts say have been one of the largest factors fueling bitcoin’s recent rally.
“Spot ETF inflows are a dominant driver of Bitcoin returns and have reached record levels in the days since the election,” noted Citi analysts David Glass and Alex Saunders.
These funds allow investors to buy bitcoin through traditional financial markets, bringing an influx of institutional money and increased confidence in the asset.
The April “halving” event, which cut the reward for bitcoin miners in half, also plays a role. This reduction in supply, coupled with growing demand, has added upward pressure on bitcoin’s price.
Bitcoin’s historic rally isn’t without risks. Cryptocurrency’s notorious volatility means prices can spike or plummet rapidly, with markets open 24/7. Susannah Streeter, head of money and markets at Hargreaves Lansdown, advises investors to approach crypto cautiously, noting that “we’ve seen these wild swings in the past.” Bitcoin’s price has previously dropped sharply, such as in 2021 amid Federal Reserve rate hikes and in 2022 following the collapse of the major crypto exchange FTX.
Analysts caution that while the regulatory outlook appears positive, market dynamics could shift. For investors with low risk tolerance, crypto remains speculative and may not suit long-term portfolios without the ability to withstand significant price fluctuations.
Bitcoin mining’s heavy energy consumption is another issue. A United Nations study found that mining operations used as much energy as 190 natural gas power plants. A substantial share of this energy comes from non-renewable sources like coal and natural gas, leading to an outsized carbon footprint. While industry leaders claim that renewable energy use has grown, mining’s environmental impact remains a point of contention, particularly as crypto mining operations in the US continue to expand.
Bitcoin’s future looks promising but uncertain as Wall Street awaits the impact of Trump’s administration on the crypto industry. Market analysts predict more regulatory clarity, increased institutional support, and potentially a US-based strategic reserve of bitcoin. However, as with all crypto investments, price volatility and environmental concerns could temper optimism, even as the industry gains legitimacy.
