Trump gives a keynote speech at the Bitcoin 2024 conference in Nashville on July 27, 2024. Bitcoin has surged since Trump’s election amid hopes he will usher in an administration friendly to its interests.
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Jon Cherry/Getty Images/Getty Images North America
On Tuesday night, Bitcoin hit $100,000 for the first time, a remarkable milestone for a cryptocurrency created over 15 years ago.
The surge has been nothing short of spectacular. The value of bitcoin has more than doubled this year, turbocharged by the election of Donald Trump.
It’s easy to see why. Trump has promised to make the U.S. “the crypto capital of the planet” by bringing in friendly regulators and ending the tough enforcement actions taken against the sector under President Joe Biden. Trump has also proposed a crypto “strategic reserve,” potentially turning the country into a direct investor of cryptocurrencies. His family has even invested into a crypto venture.
Crypto investors may be cheering Trump on — but critics are raising alarms.
Cryptocurrencies have long had a history of fraud and scams, as the 2022 collapse of crypto exchange FTX made clear. And they have been notoriously volatile. Some critics believe they could even pose a risk to the country’s financial system.
Here are three things to know about bitcoin’s spectacular ride.
How the crypto world was upended by the election of Donald Trump
For bitcoin, Trump’s return to the White House promises to be a game changer. Prices have surged over 40% since Election Day, with the rally gaining steam before Trump was even elected as investors anticipated his victory.
Trump was once a skeptic of cryptocurrencies, calling them a “scam” and telling Fox Business they were “potentially a disaster waiting to happen.”
Things have changed.
Trump avidly courted votes from the crypto industry by promising to usher in a crypto-friendly administration and to fire Securities and Exchange Commission Chair Gary Gensler, who antagonized the industry during his tenure by going hard after crypto companies.
Gensler said on Thursday he would resign on Jan. 20, when Trump is inaugurated. It’s a widely anticipated move, given that SEC chairs typically resign when a new administration comes to power.
Trump is expected to appoint an SEC chair who’s far more supportive of crypto interests — and will likely look to appoint similarly-minded regulators at other agencies important to the sector, such as the Commodity Futures Trading Commission.
In addition to supporting Trump, the crypto sector spent millions to elect friendly people to Congress. Those efforts included helping Republican Bernie Moreno, a businessman who has expressed support for cryptocurrencies, defeat Democratic Sen. Sherrod Brown in Ohio. Brown is the chairman of the Senate Banking Committee and is skeptical of cryptocurrencies.
Republicans will also control Congress next year, fueling hopes in the crypto sector for far more favorable regulations.
“There’s little doubt that the Trump administration, and the regulators that he’s going to appoint, and probably Congress under the control of Republicans, are going to unleash an unregulated crypto industry on Americans,” said Dennis Kelleher, a crypto skeptic who’s president and CEO of the advocacy group Better Markets.
Executives of BlackRock ring the opening bell as investment funds tied to bitcoin are launched on the Nasdaq Exchange in New York City on Jan. 11, 2024 in New York City. The launch of these investment funds have helped bitcoin go a little more mainstream.
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Stephanie Keith/Getty Images/Getty Images North America
The rally is expected to continue — but it could be volatile
The swiftness of the bitcoin rally over the past couple of weeks has investors hoping for further gains. But they’re not just optimistic because of Trump and the Republican Congress.
Bitcoin is becoming more mainstream, especially since earlier this year when SEC Chair Gensler reluctantly approved the launch of investment funds tied to bitcoin (called exchange-traded funds) that can be held by average investors.
These funds have proven popular, with overall assets rising above $100 billion. That’s increasing demand for bitcoin.
However, cryptocurrencies are notoriously volatile. The industry has also seen spectacular implosions. FTX, once the world’s biggest crypto exchange, collapsed in 2022 and its founder and CEO, Sam Bankman-Fried, was convicted of fraud for stealing billions in customer money. Bankman-Fried was later sentenced to 25 years in prison.
Critics are alarmed
The volatile and checkered history of cryptocurrencies has many critics alarmed.
Kelleher worries that average investors may be lured by the promises of riches and end up being the victims of scams.
“Crypto is the priority of the crypto billionaires who are getting rich through speculators and gamblers with crypto. And frankly, there’s a bunch of them getting rich due to criminal activities from money laundering to financing terrorists and rogue states, and tax evasion,” Kelleher said.
“But that money’s all coming from the pockets of people who are being duped into thinking that this particular new financial product has some value, or worth, when it really is nothing but a vehicle for speculation,” he added.
If looser regulations help make cryptocurrencies more mainstream, they could become further integrated into the country’s financial system, raising the prospect of increased volatility and potentially even financial crises, Kelleher warns.
“The clock will start ticking on a coming catastrophic financial crash that, in my view, will be much worse than 2008,” Keller said, referring to that year’s global financial crisis. “It’s only a matter of time.”
Additional reporting by Maria Aspan
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