Bitcoin has surged to a record high in the aftermath of Donald Trump’s election win, exceeding the $80,000 mark. Investors are bullish about what a Trump presidency could mean for the asset.
“The price is up over 20% since last Monday, and over 95% since the start of 2024,” says Simon Peters, crypto analyst at eToro. He adds that crypto stocks like Microstrategy and Coinbase have also been some of the “strongest-performing instruments in equity markets” since the election result.
Some investors believe a Trump administration could have a positive effect on crypto prices after several comments made on the campaign trail. Trump said he wanted to turn the US into the “crypto capital of the planet”. He also indicated he could make the regulatory environment less restrictive.
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Investors have been snapping up crypto as a result in what is being termed a “Trump trade”. But the asset remains largely unregulated and highly volatile, which means there could be quick and major changes in its price. How long will the bull market continue?
Will Bitcoin continue to rise?
Recent gains have caused some to speculate whether crypto will ever hit the $100,000 mark. Some believe Trump could introduce a less restrictive regulatory environment, for example, giving the asset a further boost.
During the election campaign, Trump threatened to sack the current chair of the Securities and Exchange Commission (SEC), Gary Gesler. Gesler has cracked down on crypto during his tenure as SEC chair, bringing more than 100 actions against crypto firms, according to CNBC.
It is worth pointing out that this is a fairly recent pivot from Trump – probably driven by political expedience and the rise of the “crypto voter”. In his first term as president, he expressed more negative views.
There has also been a fair amount of noise about crypto’s potential as a future reserve currency. Proponents of this include Republican senator Cynthia Lummis, who introduced a bill to the Senate in July proposing a strategic Bitcoin reserve.
The Bitcoin Policy Institute, a US think tank, says that Bitcoin's “fixed supply and decentralized nature offer a unique complement to traditional monetary reserve assets such as gold and Treasury securities”. This is all in its early stages at present, but developments one way or the other could drive the Bitcoin price.
“As to how high the bitcoin price goes, it’s anyone's guess,” says Peters. “However with Trump set to be president and the Republican Party having a majority in the Senate – and on the cusp of securing the House of Representatives too – if the US adopts bitcoin as a strategic reserve asset this could act as a massive tailwind for the bitcoin price, taking it well into the six-figures.”
Others like Graham Cox, director at specialist finance broker Bridging Hub, are more sceptical about the recent rally. “The whole thing has the whiff of Tulip mania, and we all know how that turned out,” he says.
Should you invest in Bitcoin?
Bitcoin and other cryptocurrencies are largely unregulated and can be subject to wild price swings and volatility. This means you can make large gains but also devastating losses.
There are very few market fundamentals behind them beyond supply and demand. For example, one of the factors that has been pushing the Bitcoin price higher this year has been its adoption into some mainstream investment products in the US, after the SEC authorised the first spot Bitcoin ETFs back in January.
“Bitcoin doesn’t have any earnings and doesn’t pay an income, so price action is largely driven by sentiment,” says Laith Khalaf, head of investment analysis at AJ Bell. “If you buy some, you’re relying on someone paying more than you further down the line to turn a profit.”
He adds: “While that’s true of shares in companies too, earnings in the real economy provide an anchor for sentiment to coalesce around. Even with this stabilising force, equity markets can be choppy enough.”
The Financial Conduct Authority (FCA) has warned that cryptocurrency investors should be prepared to lose all their money. It isn’t a good asset for beginners and should not form a core part of your portfolio.
If you understand the risks and are still keen to have some exposure, you could consider a small allocation as part of a broadly diversified portfolio. Make sure you use a recognised trading platform and be wary of crypto scams.
While cryptocurrencies aren't regulated, platforms that let you buy and sell them should be approved for anti-money laundering purposes by the FCA and should appear on its register of cryptoasset firms.
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