Last Updated:November 12, 2024, 17:38 IST
As Bitcoin closed in on nearly $90,000 for the first time on Monday, cryptocurrency analysts and investors hope that Donald Trump would push through legislative and regulatory changes that they have lobbied for
While some analysts expect the Bitcoin value to soar even further in the coming days, others still ask small-pocketed investors to exercise caution.
Donald Trump’s victory has set off a new high for Bitcoin, which topped $87,000 for the first time on Monday. The cryptocurrency and crypto-related investment gains have been attributed to the “crypto-friendly” nature of the Trump government 2.0, analysts say.
Trump has made big promises related to cryptocurrency as he counted on a large amount of cash for his campaign and related PACs.
With the Republican-controlled Senate being the future of American politics for the next four years, there could be a few roadblocks for Trump to set up a more pro-crypto platform.
What Has Trump Pledged On Cryptocurrency?
Trump has stressed his support for digital assets, vowing to position the US as the “crypto capital of the planet” and build a national Bitcoin reserve.
At the biggest bitcoin conference in Nashville in July, Trump in his keynote address said if he returned to power, he would make sure that the federal government never sells off its bitcoin holdings.
He also pledged to maintain the current level of bitcoin holdings that the US has accumulated from seizing assets from financial criminals. “If I am elected, it will be the policy of my administration, United States of America, to keep 100% of all the bitcoin the US government currently holds or acquires into the future,” he said, as quoted by CNBC.
Reports suggest that Trump is considering appointing pro-crypto advocates, including Mark Uyeda and Paul Atkins, as replacements for current Securities and Exchange Commission (SEC) Chairman Gary Gensler, which could lead to reduced regulatory scrutiny on the industry.
The president does not have the power to fire the SEC chair. So, Gensler would remain a commissioner on the independent agency even if Trump were to appoint a new chairman.
Trump also vowed to create a “bitcoin and crypto presidential advisory council.”
What Is Cryptocurrency And Why Is Bitcoin Soaring?
Cryptocurrency is digital money that is designed to work through an online network without a central authority backed by a government or banking institution. The crypto transactions are recorded with blockchain technology.
Bitcoin is considered the largest and oldest cryptocurrency. Some of the other cryptocurrencies, which have gained popularity over the years are Ethereum, Tether and Dogecoin.
Crypto industry players welcomed Trump’s victory, and hope that he would push through legislative and regulatory changes that they have lobbied for over the years.
Since the election, Bitcoin has been a standout performer, reaching $89,604 and achieving nearly a 30% gain since November 5, as per a report by The Economic Times.
Even before the election, assets like Bitcoin posted significant gains over the past year. The early success goes to the new way to invest in the digital asset through spot Bitcoin ETFs (exchange-traded funds), which were approved by US regulators in January, as per a report by the Fortune. The SEC approved 11 funds from asset managers such as Blackrock, Invesco and Fidelity in January.
What Are The Risks Involved?
Being highly volatile, crypto assets like Bitcoin have a history of drastic swings in value. One can lose money as quickly as they have gained.
In the 2020 pandemic, the value of Bitcoin was $5,000. Its price climbed to nearly $69,000 by November 2021, in a time marked by high demand for technology assets, but later crashed during an aggressive series of Federal Reserve rate hikes aimed at curbing inflation, as per Fortune.
While some analysts expect the Bitcoin value to soar even further in the coming days, others still ask small-pocketed investors to exercise caution.
Meanwhile, CoinDesk senior analyst James Van Straten cautioned that Trump’s proposed tariffs on China will drive consumer prices higher. Consequently, bond yields will also go higher and interest rates will have to stay elevated. “We may even see rate hikes back on the table. This could stunt risk-on assets – and bitcoin remains in that category”.
The Republican Party will control both houses of Congress when Trump takes office in January. That would enable him to push an agenda of slashing taxes and shrinking the federal government.
Trump has warned that the Euro bloc will “pay a big price” for not buying enough American exports, with cars a particular target. He has threatened China with blanket 60% tariffs.
Potentially inflationary tariffs and immigration policies have seen markets pare back the likelihood of a quarter point Federal Reserve interest rate cut on December 18 to 69% from nearly 80% a week ago, according to CME Group’s FedWatch Tool. The Euro is feeling additional pressure from political uncertainty in the bloc’s biggest economy, Germany.
(with inputs from Reuters)