Why Is Bitcoin Going Up?

So what’s going on? What pushed BTC past the $97,000 mark? 

One word: Trump. Chiefly the re-election of Donald Trump as president, who actively adopted a pro-crypto stance during his campaign, marking the first election where crypto has become a partisan issue in US politics. Trump was widely viewed as much more pro-crypto than his opponent, Kamala Harris, who had been the vice president of the anti-crypto Biden administration for almost four years. 

Trump has repeatedly voiced his support for crypto assets, promising to make the US “the bitcoin superpower of the world” and even hinting towards creating a “strategic US Bitcoin reserve”. However, while its easy to get caught up in one presidential candidate versus another, the reality is that an election doesn’t just decide a presidential change but rather an entire change of government. 

While Trump himself is pro-crypto, the crypto community is much more bullish about the make-up of the new government. According to StandWithCrypto.org, both the House of Representatives and the Senate have an overwhelming majority of pro-crypto politicians for the first time. Additionally, many in the crypto community believe that this new government will spell the end of Gary Gensler, the current chair of the US Securities and Exchange Commission who has been dogged in laucnhing cases against crypto exchanges. Rumour has it that Trump is eyeing off several pro-crypto candidates to be his successor. 

Many traditional stocks also performed well in the hours after Trump’s victory, including crypto stocks, which surged 7.5% higher following the election result. According to US-based CEO of infrastructure at Capital Advisors, Jay Hatfield, it was part of a broader market reaction to the re-election of a president who defines himself as a businessman first (and a politician second).

“The combination of a Fed-easing cycle, AI-driven technology boom and a pro-business administration is extremely bullish for the stock market,” Hatfield said in a statement. In fact, in the weeks leading up to the election, and a possible return to a Trump Administration, BTC rose to $72,100 for the first time since June 2024. This was largely a result of increased capital inflows for spot Bitcoin ETFs.

This isn’t the first significant surge event for BTC in 2024. On Tuesday, March 5, BTC surged after the newly approved spot bitcoin ETFs experienced record daily inflows and the amount of bitcoin held on centralised exchanges fell to a new low. The demand for bitcoin, largely driven by the new ETFs, was outstripping the supply of BTC available in the market, creating a situation where the price was surging to bring sellers into the market to meet demand.

This rise was an extension of the run that began in October last year when news regarding BlackRock’s plans for a BTC Exchange Traded Fund (ETF) pushed the price to new highs for 2023. In early January, 11 spot BTC ETFs where approved to trade in the US for the first time in history, marking a significant milestone for the crypto market and solidifying bitcoin as a legitimate investment in the eyes of institutions.

While the enthusiasm surrounding the approval of the BTC ETFs, and the impact of Trump’s re-election is undeniable, it’s crucial to remember the crypto industry still faces headwinds from the SEC and similar regulatory bodies worldwide. While many in the crypto industry will be glad to see an end to Gary Gensler’s tenure, there are no promises that his replacement will create clearer regulatory guidelines.

The digital currency landscape is still navigating an unclear regulatory environment, trying to establish a balance between innovation and consumer protection. Recent lawsuits by the SEC against major cryptocurrency exchanges, such as Binance and Coinbase, are a stark reminder of the sector’s ongoing regulatory challenges—and while Trump has promised to remove Gensler, there is no guarantees in politics.

Moreover, the broader macroeconomic landscape cannot be ignored. Global markets are still grappling with the challenge of taming inflation, and while it’s possible that Trump’s economic plan could affect inflation, ultimately the US Federal Reserve (FED) is the one with the most influence. These factors may put pressure on all asset classes, not just cryptocurrencies. The increasing cost of borrowing and the decreasing value of money can act as deterrents to new investors and could potentially impact the overall growth trajectory of the crypto market, as investors park their money in so-called “safe havens”.

Bitcoin’s recent increase in price is a positive sign for Australian crypto investors, signalling potential growth and resilience in the crypto market. This bounce reflects not just a recovery in cryptocurrency markets but also a growing acceptance and integration of digital assets into conventional financial systems. For Australians invested in or considering entry into the crypto space, this trend signifies a promising horizon.

The ripple effects of international acceptance, including the successful launch of bitcoin ETFs and the Trump 2.0 price surge, may encourage a more supportive and engaging approach from local financial institutions and regulatory bodies toward cryptocurrencies. Australian investors are operating in an evolving market, where the increased legitimacy and stability of digital currencies could lead to their inclusion as a part of a balanced investment portfolio, opening the doors to further investment from larger indexes and funds. 

Further investment in this emerging asset class would compound the legitimacy effect, further enhancing market liquidity, and potentially, driving more favourable regulatory frameworks. As the global financial ecosystem gradually embraces cryptocurrencies, Australian investors may benefit from the broader acceptance of cryptocurrencies and the potential for substantial returns as the market matures.

Nevertheless, positive forecasts do not make cryptocurrencies any less risky or volatile. Be sure to do your own research on whether crypto is right for you, and don’t invest money you can’t afford to lose.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class.  Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.