This Bitcoin surge differs due to the following reasons:
It's undeniable that Bitcoin (BTC 0.23%) is having an outstanding year in 2024. With a 130% year-to-date increase, it's finally making headways into mainstream acceptance after hitting a record $100,000 following the presidential election.
However, Bitcoin's growth isn't new. In 2013, it saw a 5,481% surge; 2017 brought a 1,369% increase; 2020 witnessed a 303% surge; and even back in 2013, it experienced a 155% hike. So, what sets this Bitcoin surge apart from its past rallies? Let's delve deeper.
The introduction of spot Bitcoin ETFs
A major factor behind this year's surge is the introduction of new spot Bitcoin exchange-traded funds (ETFs) in January. These ETFs attracted significant investor inflows, now managing tens of billions of dollars in assets. The leading spot Bitcoin ETF, the iShares Bitcoin Trust (IBIT 1.07%), alone manages a staggering $53 billion in assets.
These inflows show no signs of slowing down as we enter 2025. In just the first two weeks of December, a total of $4.4 billion flowed into these Bitcoin ETFs. On two of those days (Dec. 3 and Dec. 12), more than $500 million was invested into these ETFs. The expectation is that investor inflows into Bitcoin ETFs might even increase in 2025.
This new influx fuels buying pressure, serving as a supportive price floor for Bitcoin. In simpler terms, Bitcoin ETFs can absorb any excessive selling pressure present in the cryptocurrency market.
While some Bitcoin investors may consider cashing out now that it's breached the $100,000 mark, keep in mind that fierce buying pressure might attract even more investors eager to buy Bitcoin via ETFs.
Thus, the current Bitcoin rally appears to have more momentum than past rallies. Previous rallies, let's be honest, felt more like temporary, speculative frenzies. This surge, conversely, appears to have broader backing – not just from individual investors, but also from large institutional investors, who are deploying ETFs to diversify their portfolios.
The pro-crypto Trump administration
The post-election Bitcoin surge can be attributed to one significant factor: the crypto-friendly policies of the incoming Trump administration. During the summer, Bitcoin gained traction as a political talking point, and the president-elect has since continued to express his support for cryptocurrencies. Most recently, he spoke about his crypto plans on the New York Stock Exchange floor.
To reinforce his commitment to the crypto sector, Trump nominated a pro-crypto candidate for the Securities and Exchange Commission (SEC) position. He also established the brand-new role of "White House AI and crypto czar," ensuring close oversight of the crypto industry. Plus, earlier promises to aid the Bitcoin mining industry and transform the U.S. into the "crypto capital of the world" remain in play.
And get this – Trump may kickstart another Bitcoin price surge by establishing a strategic national Bitcoin reserve. Under the current plan, the US government would purchase 200,000 Bitcoins yearly for the next five years. By the end of the five-year period, the US would own a substantial 5% of the global Bitcoin supply.
Unprecedented government support for Bitcoin is shaping public perception around the digital currency. Gone are the days when Bitcoin was merely associated with illicit activities. Now, it's recognized as a potential hedge against inflation and a means to generate long-term wealth.
What's next for Bitcoin?
The most exhilarating part of this Bitcoin surge is the possibility of its longevity and magnitude surpassing previous Bitcoin rallies. For example, Bitcoin skyrocketed by 5,481% in 2013, but then plummeted 58% in 2014. Bitcoin increased by 1,369% in 2017 only to lose those gains in 2018, declining 73.5%. In 2020, Bitcoin climbed 303%, but fell 64% in 2022. Bitcoin's fluctuating history has left many investors skeptical.
So, if you're a Bitcoin investor, keep your fingers crossed. If the spot Bitcoin ETFs can help reduce Bitcoin's volatility, the price of Bitcoin may soar in the coming years. And if Trump delivers on his crypto promises, the Bitcoin price could skyrocket, creating unprecedented wealth for its investors.
The introduction of spot Bitcoin ETFs in January 2024 has significantly contributed to the surge of Bitcoin, attracting large investor inflows and providing a supportive price floor for the cryptocurrency. With these ETFs managing tens of billions of dollars in assets, and investor interest showing no signs of slowing down, more money is likely to flow into Bitcoin via these ETFs.
The pro-crypto policies of the Trump administration have also played a crucial role in the Bitcoin surge, transforming public perception of the digital currency from being associated with illicit activities to being recognized as a potential hedge against inflation and a means to generate long-term wealth. The US government's potential establishment of a strategic national Bitcoin reserve could further boost Bitcoin's value.
