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The rise in the price of bitcoin towards $100,000 (£79,900) is the most notable of the market reactions to Donald Trump’s election victory.
The president-elect’s promise to create a cryptocurrency-focused White House and promise to make computer-generated currencies more acceptable are among the factors driving the price higher.
Some investors consider Bitcoin, like gold, to be a way to avoid the risk of dollar assets.
Geopolitical tension is increasing by the day, as symbolized by Russia’s decision to fire an intermediate-range hypersonic ballistic missile toward Ukraine.
It was the first use of such an advanced weapon, without a nuclear warhead, and was intended to show that the Kremlin is willing to improve responses to the United States and Britain, allowing kyiv to deploy longer-range rockets.
There are economic reasons why billions of dollars in cash are flowing into alternative assets.
Increase: The rise in the price of bitcoin towards $100,000 (£79,900) is the most notable of the market reactions to Donald Trump’s election victory.
Trump’s tax cut plans are seen as likely to increase the already large US budget deficit. The first reaction has been to push the dollar up against the euro, the pound sterling and other currencies.
But the magnitude of America’s debt, at 123 percent of output and rising, is cause for future concern. Even the world’s reserve currency could explode.
The price of gold in pounds hit an all-time high in recent trading, at £2,160 per troy ounce. The latest rise takes gold to surpass the previous record set in 1979 amid the geopolitical crises following the Russian invasion of Afghanistan and the US-Iran hostage crisis.
Bitcoin is also considered a safe haven, but it is also being driven by potential changes on Wall Street.
The latest rise has been driven by the announced departure of Gary Gensler as chairman of the Securities and Exchange Commission (SEC). Gensler, anticipating the firing, decided to leave at noon on Inauguration Day, just as Trump was taking the oath of office.
It has been a bulwark against the spread of bitcoin into mainstream finance, and only authorizes cryptocurrency exchange-traded funds when ordered by courts. Cryptocurrencies have moved to the heart of Wall Street.
It was during the first Trump administration that bitcoin futures and options contracts were first traded in Chicago.
In early 2024, exchange-traded funds, which allow retail and professional investors to trade complex assets, gained approval. Blackrock and other asset managers now own $85bn (£68bn) in digital currencies.
Bitcoin’s runaway price is also being fueled by software mogul Michael Saylor, who runs California-based Micro Strategy. The company had aggressively increased its exposure since Trump’s election, purchasing $7 billion in cryptocurrencies.
He’s financing his purchases through heroic fundraising. It has issued $4.6 billion in new shares and a convertible bond.
There was so much demand that he was able to increase the size of the bond offering to $2.6 billion.
One might have thought investors would be nervous about the waste. Instead, Micro Strategy shares are up 15 percent higher in recent days.
They have now risen 900 per cent over the last year, taking the company’s market value to a staggering $89bn (£71bn).
The group is now believed to be the world’s largest corporate holder of bitcoins, with a total stake valued at $31bn (£25bn).
There is a reminder of previous efforts by financiers to dominate commodity and asset markets. In 1980, Texan oilman Nelson Bunker Hunt attempted to corner the silver market, acquiring the rights to $4.6 billion (£3.6 billion) of the precious metal.
But the US central bank, the Federal Reserve, intervened and burst the bubble. Bunker Hunt’s wealth disappeared.
An attempt by a trader at Japan’s Sumitomo Bank in 1990 to corner the copper market ended in disaster and a fraud trial.
There is a big difference between buying gold and other precious metals and bitcoin. Metals traders know there is something solid behind their purchase.
Bitcoin is mined using computers and no one has any idea how this novel currency is created.
When the herd stampedes, it is a good time to retreat.
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