The oldest and most popular cryptocurrency Bitcoin reached a record high at the beginning of the week, surpassing 80 thousand dollars.
A serious factor for the price increase is the victory of Donald Trump in the US presidential elections. Since November 4th, Bitcoin has not stopped growing. “Trump has announced that he will be a crypto president and the US will play a leading role in the field of Bitcoin,", says Jonas Gross of the Digital Euro Association - a company that deals with electronic payment systems. Such declarations have so far only been made by leaders of smaller countries, such as El Salvador. And it's no surprise that the crypto community is now in euphoria.
How Trump Restored Trust
Donald Trump has spoken negatively about cryptocurrency in the past, but before this year's election, he changed his position sharply. At the biggest bitcoin conference in Nashville, the president-elect promised to deregulate the crypto market as well as provide cheaper electricity. For the so-called mining cryptocurrencies requires a huge amount of computing power, which in turn consumes a lot of electricity.
According to the director of the Blockchain Center at the Frankfurt School of Finance and Management Co-Pierre Georg, the increase in the price of Bitcoin is due to “structural reasons which were reinforced by the US election". Georg was referring to the authorization of ETFs ("exchange traded funds") for Bitcoin in January, which made investing in the cryptocurrency much easier.
ETFs copy stock indexes, such as the German DAX index. Exchange-traded funds allow access to the crypto market without investors necessarily owning cryptocurrencies.
Since ETFs were allowed in the US, a lot of money has flowed into Bitcoin, says Georg. Major investors, such as the largest asset management company BlackRock, have also invested in Bitcoin. At the same time, however, the interest of crypto exchanges such as Coinbase, Bitpanda and Kraken has not fundamentally increased.
According to Jonas Gross, the record high value is primarily due to the increase in confidence in the sector. In recent years, quite a few cases of cryptocurrency scams have come to light, but Trump's promises have subsequently changed the mood towards Bitcoin.
Crypto industry bought elections and influence
One of the biggest opponents of the Bitcoin community is Gary Gensler, the head of the Securities and Exchange Commission, which wants to regulate the cryptocurrency. According to Co-Pierre Georg Trump will try to replace Gensler - the problem is that he can't just do it because there are limits to his powers. Therefore, Trump will have to find specific faults in his activities.
Blockchain Expert Says Trump's Election Is a Victory for the Bitcoin Lobby. "The crypto industry has bought influence over the government and the new Congress," he said, referring to Elon Musk, who is seen as a bitcoin supporter and gave Trump a huge boost during the election campaign. Other politicians also enjoy the support of the crypto community.
According to Reuters, almost $120 million from the crypto industry was invested in Trump's election campaign. It is said that a particularly large amount of money was spent, for example, on the removal of the previous chairman of the Banking Committee in the Senate - Democrat Sherrod Brown, who lost the election in the US state of Ohio. Brown is considered an enemy of the crypto industry. The lobby is said to have supported the election campaign of his Republican opponent Bernie Moreno with around 40 million euros.
Bitcoin could quickly crash again
In the past, the growth of Bitcoin was also related to the fact that large companies accepted the cryptocurrency as a means of payment - for example, the payment service PayPal. "At the moment I don't see such reasons," says Georg. “Bitcoin is completely unsuitable for payment transactions and is also not a stable investment. The only real reason to buy bitcoin is speculative".
Jonas Gross has a different opinion: “Bitcoin has established itself as a new asset class. The first pension funds are already investing in it, and I think it's only a matter of time before sovereign wealth funds get involved as well. Then we will already be talking about a completely different magnitude."
However, investing today is still risky, because if Trump does not keep his promises, the cryptocurrency could crash again. “With Bitcoin, it has always been true that one should only invest if one is prepared to lose everything," says Co-Pierre Georg. Since the US election, he has been asking himself one question: “What does it say about the crypto industry that it campaigned so hard for the election of a convicted felon and political provocateur like Donald Trump, and paid off big when he was elected?"
Author: Nicolas Martin