The value of Bitcoin has risen to over $100,000 since Election Day

Bitcoin has surpassed $100,000 for the first time as a massive rally in the world’s most popular cryptocurrency sparked by the election of Donald Trump continues.

The cryptocurrency rallied after the president-elect said he planned to appoint cryptocurrency advocate Paul Atkins as the next chairman of the Securities and Exchange Commission.

Bitcoin has risen sharply since Trump won the election on November 5th. According to CoinDesk, the cryptocurrency rose from $69,374 on Election Day to as high as $103,713 on December 4. Just two years ago, Bitcoin fell below $17,000 following the collapse of crypto exchange FTX.

Bitcoin fell back to just under $103,000 in early December, but Bitcoin futures are up more than 4%. Even amid a massive rally that has more than doubled Bitcoin’s value this year, some experts continue to warn about investment risks.

Here’s what you need to know:

Back up. What is a cryptocurrency again?

Cryptocurrency has been around for some time. But chances are, you’ve been hearing about it more and more in recent years.

Essentially, cryptocurrency is digital money. This type of currency is designed to operate over an online network without a central authority – meaning it is not typically backed by a 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 view cryptocurrencies as a “digital alternative” to traditional money, but the vast majority of daily financial transactions are still conducted using fiat currencies like the dollar. Additionally, Bitcoin can be very volatile as its price depends on larger market conditions.

Why is Bitcoin booming?

Many of the recent events have to do with the outcome of the US presidential election.

Mr Trump, who was once a crypto skeptic, has promised to make the US the “crypto capital of the planet” and create a “strategic reserve” of Bitcoin. His campaign accepted cryptocurrency donations and he wooed fans at a Bitcoin conference in July. He also founded World Liberty Financial, a new cryptocurrency trading company with family members.

Crypto industry players have welcomed Mr. Trump’s victory, hoping that he would be able to push through legal and regulatory changes they have long advocated for – which generally reflect an increased sense of legitimacy without too much Target bureaucracy.

Trump took a step in that direction on December 4 when he said he planned to nominate Paul Atkins as chairman of the Securities and Exchange Commission. Atkins served as SEC commissioner during George W. Bush’s presidency. In the years since he left the agency, Mr. Atkins has spoken out against excessive market regulation. In 2017, he joined the Token Alliance, an organization that advocates for cryptocurrencies.

Under current Chairman Gary Gensler, the SEC has cracked down on the crypto industry, punishing a number of companies for violating securities laws. But he also faced criticism from industry players such as Robinhood’s chief legal officer, who described Mr. Gensler’s approach to crypto as “rigid” and “hostile.” Mr. Gensler will resign when Mr. Trump takes office.

One crypto-friendly move by the SEC under Mr. Gensler was the approval in January of spot Bitcoin ETFs, or exchange trade funds, which allow investors to gain exposure to Bitcoin without buying it directly. Spot ETFs were the dominant driver of Bitcoin price before the election – but, like much of the cryptocurrency’s recent momentum, saw record inflows after the election.

What are the risks?

History shows that with cryptocurrencies you can lose money just as quickly as you made it. Long-term price behavior depends on larger market conditions. Trading continues 24 hours a day, every day.

At the start of the COVID-19 pandemic, Bitcoin was valued at just over $5,000. The price rose to nearly $69,000 by November 2021 on high demand for technology assets, but later crashed during an aggressive series of interest rate hikes by the Federal Reserve. And FTX’s collapse in late 2022 significantly weakened confidence in crypto overall, with Bitcoin falling below $17,000.

As inflation began to cool, investors returned in large numbers – and profits skyrocketed on the anticipation and early success of spot ETFs. However, experts still urge caution, especially for investors on a budget. And lighter regulation from the incoming Trump administration could mean fewer guardrails.

“I would say keep it simple. And don’t take more risks than you can afford,” said Adam Morgan McCarthy, research analyst at Kaiko, adding that there is no “magic eight” to know for sure what’s next.

What about the impact on the climate?

Assets like Bitcoin are created through a process called “mining,” which uses a lot of energy. Operations that rely on pollutant sources have raised particular concerns over the years.

Recent research published by the United Nations University and the journal Earth’s Future found that the 2020-2021 carbon footprint of Bitcoin mining in 76 countries is equivalent to the emissions from burning 84 billion pounds of coal or operating 190 natural gas-fired power plants. Coal met the majority of Bitcoin’s electricity needs (45%), followed by natural gas (21%) and hydropower (16%).

The environmental impact of Bitcoin mining largely depends on the energy source used. Industry analysts claim that clean energy use has increased in recent years, coinciding with increasing calls for climate action

This story was reported by The Associated Press.

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