In today’s Finshots, we tell you why Bitcoin prices are looking up after Donald Trump’s US presidential win.
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The Story
The world’s top cryptocurrency Bitcoin is up over 100% since the start of 2024, but most of those gains have come in the past few months. Zoom in even further, and you’ll notice that following Donald Trump's US presidential win, Bitcoin jumped by over 20% in just a week! From hovering around the $60,000 mark, it's now sitting at around $90,000, and many predict that $100,000 is just around the corner.
That sure begs the question ― What's behind this sudden spike?
Let’s take it from the top.
“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
That was Donald Trump in 2019.1
But today? He has pledged to turn the US into “the crypto capital of the planet.” Quite a shift, right?
Unlike his predecessors, Trump’s administration is supportive of cryptocurrencies, putting the wind in Bitcoin’s sails. That boost likely plays a part in Bitcoin’s surge, beyond just the positive crypto vibes. And if you take a closer look, you’ll see other reasons too.
First up we have Bitcoin mining. See, crypto mining is notoriously energy-intensive, but Trump wants it to be mined, minted and made in the US.2 Think about it. If the US becomes the top miner, it could boost its role in the crypto world and strengthen Bitcoin’s infrastructure. Plus, it fits right into Trump’s energy strategy.
How? Well, he plans to deregulate the energy sector, making energy more accessible and affordable.3
Now, it's important to understand that the US is already a net oil exporter, and more deregulation could make energy even cheaper. Since energy makes up 60-70% of Bitcoin mining costs, cheaper energy means more profitable mining.4 That’s why crypto holders are excited — lower energy costs could boost miners' margins and strengthen Bitcoin’s network. It’s a win-win.
The second reason is Trump’s friendlier approach to digital assets.
He has hinted at working with crypto advocates like Elon Musk, who’s backed Dogecoin (which also saw a post-election surge).5 This is a big shift from previous administrations and boosts market confidence. Plus, Trump plans to replace SEC Chair Gary Gensler, who pushed for tighter crypto rules under Biden. This shake-up could mean less regulation, which Bitcoin fans are celebrating.
But perhaps the most eye-catching promise from Trump is the idea of a US Bitcoin Strategic Reserve.6
What's that, you ask?
Think of it as a national oil or currency reserve — but instead of those assets, it’s filled with Bitcoin.
The idea was drafted by US Senator Cynthia Lummis, and she called it the Strategic Bitcoin Reserve Bill. It proposes establishing a network of decentralized storage facilities across the US to securely hold Bitcoin reserves. Then it mandates the US Treasury to purchase 200,000 Bitcoins annually over five years. That's 1 million BTC in total! The government would hold these reserves for at least 20 years and implement a proof-of-reserves system to verify holdings. In case you’re wondering, this system lets the government show that it’s securely holding the Bitcoin without revealing details that could put Bitcoin security at risk. Public audits would then confirm that the government actually has the Bitcoin it claims to.
This is HUGE!
Because at Bitcoin’s current price of about $90,000, this would cost the US over $90 billion. Sure, you could argue that the buying period would span five years, and Bitcoin's price could fluctuate. But the idea of a government entity buying up 5% of Bitcoin’s total supply is bound to push prices up, right? And because it’s the US, investors are taking note.
Plus, this isn't just about Bitcoin. As Lummis puts it, “Our aim was to establish it as a modern parallel to our gold stockpile, serving as a digital-age hedge against economic uncertainty while maintaining the Treasury's historical role in safeguarding critical national reserves.”
So yeah, the US would see these reserves as a “digital-age hedge against economic uncertainty”, much like the gold stockpile.
And remember, this is something no other country has attempted, and if it happens, it could cement the US as the global leader in crypto assets or maybe even spark interest from other countries.
Even without the Trump factor, macroeconomic trends are also giving Bitcoin a boost. The US national debt is at record levels and is expected to grow even further. Historically, when government debt grows out of control, investors look for hedges or protection against weakening currencies. And Bitcoin, with its fixed supply of 21 million coins, is seen as that hedge because it can't be inflated like traditional money.
So all of this seems like the perfect storm for Bitcoin.
But does this mean that Bitcoin is only going up?
Well, we don’t have an answer to that. Because Bitcoin's history is peppered with volatility and it could see wild swings in no time. And there’s no easy way to value it as an asset.
Sure, the fundamentals and buying interest seem strong right now, but market corrections are a natural part of any asset's journey, especially for something as speculative as Bitcoin. Following the 2017 bull run, for example, Bitcoin lost nearly 80% of its value by the end of 2018 before recovering. And similar drawdowns have occurred after each previous rally.
Geopolitical events, regulatory crackdowns, or even technological issues can impact Bitcoin prices, like the 2021 Chinese crypto mining ban, which triggered a major slump. And while Trump’s policies might be favorable now, there’s always the risk of unforeseen reversals or regulatory pressures, especially those concerned about cryptocurrencies’ impact on financial stability.
Bitcoin’s upcoming halving event is another potential driver of volatility. So here’s the thing. Bitcoin miners validate transactions and get rewarded with new coins. But every four years, this reward halves. For instance, when Bitcoin started in 2009, miners earned 50 Bitcoins per block. By 2020, it dropped to 6.25 Bitcoins. And this year it halved again to 3.125 BTC.
And historically, halving events have led to rapid price surges, followed by corrections. Maybe it’s these wild swings that make Bitcoin thrilling, yet nerve-wracking, for investors.
Sidebar: The last Bitcoin is expected to be mined around 2140, but as rewards keep halving, they’ll eventually become so small that some of the 21 million Bitcoin might never be fully mined.
Whatever it is, another interesting bit you can’t ignore here is how companies that are providing power for Bitcoin mining have seen their stock prices surge too. This simply means that anywhere Bitcoin intersects with Trump’s policies, investors are eyeing big gains. And for those not into Bitcoin or its price swings, companies like these could be a solid bet.
So yeah, that’s exactly why Bitcoin prices are on the rise and why it’s one of the hottest topics in finance, again. And we’ll just have to wait and see where prices go from here.
Until then…
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Story Sources: Aljazeera [1], Yahoo [2], S&P Global [3], IEA [4], Economic Times [5], Decrypt [6]
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