Donald Trump Ignites a Sharp Bitcoin Rally. Is $100K Incoming?

The week gone by was a big one in financial markets... one that will be spoken about for a long time.

Donald Trump was elected as the new US president last week.

With Trump back in power, it's almost a given - his pro-business stance and commitment to boosting the American economy are front and center.

The surge in share prices reflects investor confidence that his agenda will drive this deal to completion.

Stocks in the US market rallied overnight on the election day, with Tesla jumping 15% and DJT soaring over 30% during the same period. Other big gainers were fintech companies tied to the crypto industry. Coinbase shares rallied, marking their strongest performance since January 2023.

But if you ask me, the real standout performer was Bitcoin.

The largest cryptocurrency skyrocketed to a new all-time high of $75,000 as Trump's odds of winning gained momentum.

The rally further gained momentum as Bitcoin rallied to a new all-time high of $81,000 today.

A big part of the reason why crypto prices, especially Bitcoin, is inching higher is because Donald Trump is now the first Bitcoin president.

Bitcoin - 1 Month Performance

First Bitcoin President

Trump has not shied away when it comes to bitcoin, and he has always had a pro-stance towards the crypto market.

This time, Trump campaigned on a vision of a pro-Bitcoin administration - one that would protect digital assets, create a regulatory environment favoring crypto growth, and establish a US Bitcoin strategic reserve.

These moves would not only boost Bitcoin but could also spark a global domino effect.

Allow us to explain...

In the aftermath of World War II, the global economy was in shambles. To stabilize the world financial system, the US laid the foundation for the US dollar to become the world's reserve currency. The concept was simple yet powerful: tie the value of the dollar to gold and have all other currencies pegged to the dollar.

But it wasn't until the 1970s that the true dominance of the dollar was cemented. The US struck a deal with Saudi Arabia and other OPEC countries. The agreement? All oil sales would be conducted in US dollars.

This deal was a game-changer. Countries that needed oil were forced to hold dollars, creating a constant demand for the US currency.

Now, imagine a scenario where a new administration, like Trump's, decides to embrace Bitcoin fully.

If Trump champions Bitcoin, other nations may feel compelled to follow suit.

How Trump Winning May Help Bitcoin Miners

With Trump taking charge as the US president, it spells good news for bitcoin miners.

You see, deregulating the energy industry could unlock new levels of abundance and drive down prices.

Pair that with a pro-Bitcoin President, and you've got a powerful tailwind for the crypto market. This combination could turn Bitcoin mining into an even more attractive investment opportunity.

In fact, we are already seeing some things happening. The central bank of Argentina has opened an art exhibit that actively mines bitcoin.

To be honest, I've never seen such a stance from a central bank towards mining bitcoin.

Bitcoin's Performance 1 Year After the US Elections

Let's look at a few historical data points to see how Bitcoin has performed after the US elections.

A user on X shared an interesting table the other day, showing exactly how the price has moved.

As can be seen from the table above, in each of the instances, the prices have gone up.

Nevertheless, if you want to take this data with a pinch of salt, that's also fine as the BTC does not care who the next president is. The cryptocurrency has continued to go higher in the long run.

Bitcoin in 2024 so far...

In 2024 so far, Bitcoin is up around 85%.

This rally seen in 2024 was helped by robust demand for bitcoin-based exchange-traded funds (ETFs) and interest-rate cuts by the Federal Reserve.

At the start of this year in January 2024, when Bitcoin prices were hovering near $45K, we wrote to you about Bitcoin explaining why the crypto adoption may take place this year.

We explained why it was important that you spend some time to re-evaluate what is happening in the crypto space... it's not for any reason that Bitcoin is one of the best performing asset over the last decade despite all the chaos and uncertainty surrounding it.

If you are invested or looking to invest in cryptos, we suggest entering the arena with low expectations.

If things go well and bitcoin's price rises, you will be pleasantly surprised. If things don't go well and bitcoin's price goes down, you will have expected it. It's all about closing the gap between expectations and reality.

What Next?

From the above data points, one thing becomes clear. The momentum is surely building up in cryptos, especially in Bitcoin.

It's simple economics... as new demand enters the market... the prices go up.

Satoshi Nakamoto once said, "When someone tries to buy all the world's supply of a scarce asset, the more they buy the higher the price goes."

Things could get really interesting over the next few months once there's more clarity on how Trump proposes to promote bitcoin, bitcoin mining, and ultimately create a bitcoin strategic reserve.

A bitcoin strategic reserve would be a gamechanger... it will be unlike anything we have seen before.

Once US implements this, every nation and every central bank would have to quickly create a bitcoin strategy.

Most data points suggest to more gains for Bitcoin. The open interest in bitcoin's price running above $90,000 rose to more than $2.8 billion on the popular Deribit derivatives exchange.

The bulls are clearly in control. Just sit back and enjoy the show if you are a bitcoin holder!

Equitymaster on Cryptos

We at Equitymaster are not against investing in Bitcoins at all.

However, an investment like a Bitcoin should not be where you park your maximum savings. They should be the high risk-high return part of your overall corpus.

Equitymaster's take on cryptos is simple.

We don't get cryptos. It's something that has caught our imagination, but we just can't figure out a way to value it. Fundamentally speaking.

Our "fundamental" take on cryptos is in line with the approach anyone should have when dabbling in a space one does not understand.

Invest only what you can afford to lose. Nothing more.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...