The largest and most popular cryptocurrency has seen a massive rally during election week as results favoured Republicans, more than doubling from the year’s low of $38,505. It was last trading at $87,079.
Let’s examine the factors driving this growth:
What prompted the rally?
Bitcoin began its upward movement in September when the Federal Reserve announced a reduction of 50 basis points to its benchmark interest rates.
The cryptocurrency then breached the $60,000 level. Lower interest rates meant higher overall demand for newer, riskier assets like cryptocurrency.
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This came after months of price uncertainty that had engulfed Bitcoin. All cryptocurrencies registered gains in September. Trump 2.0
With November came the much-anticipated US elections. Bitcoin, already on an upward trajectory, received a further boost when exit polls started indicating a Republican victory and Trump’s return to the White House. It has become one of the most eye-catching movers on the exchanges this week since the election and touched $89,637 in Asia — a gain of more than 25% since 5 November.
Analysts attribute this to the Trump effect, as the returning president has been supportive of the industry, pushing up demand for cryptocurrency stocks and the currencies themselves.
The digital assets gained further momentum when Trump embraced them during his campaign. He promised to make the United States the “cryptocurrency capital of the planet” and to accumulate a national stockpile of Bitcoin. Trump also unveiled a new cryptocurrency business, World Liberty Financial, in September.
Reduced scrutiny
With Trump back in power, cryptocurrency investors anticipate an end to increased scrutiny under US Securities and Exchange Commission (SEC) chair Gary Gensler, whom Trump has said he will replace. Gensler, whose term ends in 2026, views the cryptocurrency industry as a risk to investors, citing the collapse of FTX and multiple other bankruptcies and scams that triggered calls for tighter regulation.
The SEC has brought dozens of enforcement actions against Coinbase, Kraken and others under Gensler, accusing them of flouting US securities laws meant to inform investors about potential risks. The cryptocurrency organisations have denied the SEC’s allegations.
New products incoming
The cryptocurrency industry has spent years clashing with Democratic President Joe Biden’s administration over regulatory issues.
Cryptocurrency asset managers including Bitwise and Canary Capital are planning new products ahead of what many executives expect to be a more cryptocurrency-friendly administration, while others including Ripple are planning a fresh push for cryptocurrency legislation in the new Congress, executives and lawyers told Reuters.
