Bitcoin Reaches New Peak in Value Following Trump's Election Victory. What's the Future Hold?
Since Donald Trump clinched the presidential election on November 5th, Bitcoin (BTC -0.71%) has been on fire. The world's top cryptocurrency has surged by 40% over the past two weeks, hitting new all-time highs not only daily but hourly. Currently, it's trading around $98,000, just a stone's throw away from the significant price level of $100,000.
It seems that Bitcoin's ascent has no limits. The optimism toward crypto under the Trump presidency is growing, and analysts are likely to boost their price predictions for Bitcoin as we approach 2025. Let's delve deeper.
Trump's pro-crypto policies
The "Trump trade" is essentially a bet that some of the pro-crypto promises made by Trump during his campaign will come true once he's in office. These include the establishment of a friendly crypto regulatory environment in the U.S., support for the Bitcoin mining industry, and the creation of a strategic Bitcoin reserve.
While each of these actions could drive Bitcoin's price upward, the most notable one is the creation of a strategic Bitcoin reserve. As suggested by U.S. Senator Cynthia Lummis (R-Wyo.), this would involve the U.S. purchasing 1 million Bitcoins over the next five years, or about 200,000 Bitcoins per year.
An alternative plan — proposed by Robert F. Kennedy Jr. earlier this year — suggests that the U.S. government should buy 550 Bitcoins every single day until it owns 20% of the total circulating Bitcoin supply.
All this buying pressure will undoubtedly push Bitcoin higher, especially if other countries also view Bitcoin as a national strategic priority. For instance, what if China or Russia decide to buy Bitcoin? Or if the Middle East's sovereign wealth funds invest in Bitcoin? This could ignite a global Bitcoin buying frenzy.
Increasing demand from ETFs
And let's not forget about Bitcoin's spot ETFs. Throughout the year, these have been a significant factor in Bitcoin's remarkable gains. As soon as they were launched in January, funds started flowing into them. The largest of these new Bitcoin ETFs, the iShares Bitcoin Trust (IBIT -5.31%), now manages over $40 billion in assets. In comparison, the iShares Gold Trust, which has been around for nearly 20 years, has a total of $38 billion in assets under management.
We might just be getting started. The major investors behind the spot Bitcoin ETFs so far have mainly been hedge funds and large Wall Street institutions. However, soon institutional investors like pension funds and endowments — who previously considered cryptocurrencies too risky — are likely to start investing as well. Initially, they might only allocate 1% of their total portfolios to Bitcoin. Over time, this percentage could gradually increase.
Thus, another significant source of potential buying pressure leading up to 2025 is the increasing demand from institutional investors. Higher Bitcoin prices generate hype, which attracts more investors, driving Bitcoin's price higher, resulting in more hype... You get the picture. As long as Bitcoin's price continues to rise, there won't be any questions asked.
Get ready to buy the dip
However, maybe people should start asking some questions. Once Bitcoin surpasses the $100,000 mark, a significant pullback is likely. Inevitably, there will be profit-taking.
So are Bitcoin's bulls getting overly optimistic? At the very least, it's worth questioning the Trump administration's economic policies. Will the planned tariffs on U.S. goods lead to higher prices, benefiting or hurting Bitcoin? Can Trump's team successfully establish a strategic Bitcoin reserve?
The silver lining is that a dip in Bitcoin's price could be beneficial for those who missed out on its 130% gains this year. It would provide a final opportunity to buy the dip.
In light of the proposed plans to establish a strategic Bitcoin reserve by the U.S. government, investors might see investing in Bitcoin as a financially sound decision due to the potential price increase. Analysts are likely to boost their price predictions for Bitcoin as they anticipate the impact of this move.
Given the optimism towards crypto under the Trump presidency, there's a growing interest among institutional investors to allocate a portion of their portfolios to Bitcoin. This increasing demand from institutional investors could lead to another significant source of buying pressure, further driving Bitcoin's price upward.