A good 16 years after Bitcoin was founded, the cryptocurrency has overcome the $100,000 threshold for the first time. The oldest and best-known digital currency climbed sharply on Thursday night and broke one all-time high after another. In the meantime the price stood at 103,253 US dollars. Bitcoin has risen enormously, especially since the US presidential election on November 4th.
Bitcoin boom thanks to Donald Trump
Investors are hoping that election winner Donald Trump will implement crypto-friendly regulations. The party mood in the crypto scene was fueled by Trump’s announcement that he would make crypto advocate Paul Atkins his preferred candidate to head the powerful US Securities and Exchange Commission (SEC). The previous SEC chairman Gary Gensler, on the other hand, was known for his tough stance towards digital currencies. Gensler announced on November 21 that he would step down from his post when Donald Trump moved into the White House in January.
For many crypto investors, Gensler was a red flag. Under his leadership, the SEC generally enforced strict rules for digital currency transactions and cracked down on crypto fraud cases. Trump emphasized Atkins’ crypto affinity on his social media platform Truth Social: “He also recognizes that digital assets and other innovations are critical to making America greater than ever before.”
If Atkins actually becomes SEC boss, experts expect that more crypto ETFs will be approved. So far there are only Bitcoin and Ether as ETFs in the USA. The abbreviation ETF stands for Exchange Traded Funds, which means exchange-traded index funds. Smaller cryptocurrencies, so-called altcoins, also benefited from the speculation.
After Gensler’s departure, many crypto investors are not only hoping for laxer supervision, but are also betting that the new US government under Trump will invest in Bitcoin as a counterweight to the state gold reserve. The United States owns over 8,100 tons of the precious metal, worth around $670 billion, making it the largest known gold investor in the world.
What is Trump up to?
During the election campaign, however, it remained unclear whether Trump simply wanted to accumulate Bitcoin holdings confiscated from criminals in a crypto reserve or whether his government would actively buy Bitcoin.
Republican Senator Cynthia Lumis from the US state of Wyoming, who is considered a confidante of Trump, had proposed purchasing a total of one million Bitcoin over a period of five years and holding them for at least 20 years. Since the maximum amount of Bitcoins is limited to 21 million, that would be just under 4.8 percent of the total Bitcoin holdings.
Gambling with crypto
The recent price increase was also contributed by the fact that, following the approval of Bitcoin ETFs in the USA at the beginning of January, it is now also possible to trade Bitcoin options, i.e. to bet on the further course of the price. This means that larger investors in particular can protect themselves against falling prices when investing in Bitcoin.
To do this, you typically use so-called put options, meaning you place a bet on falling prices for little money. This has been possible since this Wednesday. In addition, bets on rising prices, so-called call options, can be used as another vehicle to bet on higher Bitcoin prices with even greater risk.
On the first day of trading, options worth almost two billion dollars were traded on BlackRock’s Bitcoin ETF alone. 82 percent of investors bet on rising prices (calls), only 18 percent bet on falling prices.
Many private investors who previously avoided Bitcoin are now asking themselves whether they have missed a lucrative trend. Crypto influencers like Roman Reher, who runs the Bitcoin channel “Blocktrainer” on YouTube, repeatedly say that it is never too late to get started with Bitcoin. Despite major fluctuations, the Bitcoin price only knows one direction in the long term, namely upwards.
“Bitcoin is speculation”
Consumer advocates still warn against becoming infected with crypto fever. According to the consumer advice center, no one can reliably predict whether Bitcoin, variants of it or other cryptocurrencies will become established as an alternative to conventional monetary systems in the medium term. “The development in recent years has increasingly moved away from the idea of an alternative means of payment and towards an object of speculation.”
Consumer advocates see several risks. “Particularly noteworthy here are the massive price fluctuations, including total losses, and the lack of security systems.” Therefore, Bitcoin is not recommended as an investment for consumers.
The consumer portal “Finanztip” also sees more risks than opportunities. “Trading in Bitcoins is highly speculative. The price has doubled within weeks, but has also halved again. There is no guarantee that you will be able to sell your Bitcoins for a profit in the future.” They could also become completely worthless.
If you still want to buy Bitcoin, you should only use money that you can do without. “Your investment should not make up more than a maximum of ten percent of your total investment.”
