Donald Trump’s election in November 2024 significantly boosted Bitcoin’s value, which surged from $52,000 to over $100,000, outperforming traditional assets. Key factors include the approval of Bitcoin ETFs, particularly by BlackRock, and the 2024 halving event, which reduced Bitcoin supply. While excitement grows, risks remain with speculative meme coins and regulatory challenges. Europe’s MiCA framework contrasts with potential U.S. deregulation under Trump, highlighting the need for effective management in the evolving cryptocurrency landscape.
The Transformative Impact of Trump’s Election on Bitcoin
The election of Donald Trump as the President of the United States in November 2024 has proven to be a pivotal moment for Bitcoin. Between September and December 2024, Bitcoin witnessed a remarkable surge, with its value soaring from $52,000 to over $100,000. This impressive performance marks a staggering increase of 124% this year alone, reaching a historic peak of $108,000. In comparison, traditional assets such as the Nasdaq index (30%), gold (27%), and the CAC 40 (-2%) have not come close to Bitcoin’s performance, placing the cryptocurrency in the seventh position among the most valuable financial assets. Additionally, the overall cryptocurrency market is thriving, with an impressive performance nearing 100% in 2024.
This prosperous year for investors follows a challenging 2023, where Bitcoin’s price rebounded from the lows of 2022, which hovered around $15,000.
Bitcoin ETFs and the Role of BlackRock
Several factors contribute to Bitcoin’s astounding success. One significant catalyst has been the introduction of Bitcoin ETFs (exchange-traded funds) after the SEC approved them in early January 2024. These ETFs track the performance of underlying assets like Bitcoin, allowing investors to buy and sell shares without the need to hold the actual asset. This innovation simplifies transactions and storage, making it easier for investors to engage with the cryptocurrency market.
Leading the charge is BlackRock, the world’s largest asset manager. Its ETF, known as IBIT, has been exceptionally well-received, accounting for half of the $100 billion amassed by the eleven approved Bitcoin ETFs. Larry Fink, the influential CEO of BlackRock, has emerged as a staunch advocate for Bitcoin, referring to it as “digital gold.” This shift in perspective from such a prominent financial player has significantly bolstered Bitcoin’s credibility among institutional investors.
Another crucial factor is the Bitcoin halving event in 2024, which reduced the daily issuance of new bitcoins from 900 to 450. Halving occurs approximately every four years, or every 210,000 blocks validated by miners who secure the network. This reduction in supply creates a conducive environment for price growth, as the total Bitcoin supply is capped at 21 million, a limit expected to be reached by 2140.
While the excitement surrounding Bitcoin and other cryptocurrencies is palpable, it is essential to acknowledge the risks involved. The surge in meme coins like Dogecoin, Shiba Inu, and Pepe resembles a high-stakes casino, where investors chase the allure of extraordinary returns. These tokens, often created as a nod to internet memes, can be highly speculative and sometimes lack utility. The ease of creating these coins raises concerns about potential scams and the need for regulatory oversight to protect investors.
Divergent Regulatory Approaches: Europe vs. the USA
The regulatory landscape for cryptocurrencies is evolving, particularly with the introduction of the MiCA (Markets in Crypto-Assets Regulation) framework in the European Union, effective from December 30. This regulation establishes a standardized legal framework for crypto-asset markets, aligning them with traditional financial systems, and aims to enhance consumer protection. In contrast, the anticipated second Trump administration in the United States may push for a more relaxed regulatory environment, influenced by figures such as Elon Musk.
However, not all players in the cryptocurrency ecosystem are embracing the MiCA regulations. Tether, the issuer of the USDT stablecoin, has resisted compliance, raising questions about the stability and regulation of stablecoins, which are crucial for maintaining market equilibrium during periods of volatility. With a market cap exceeding $130 billion, USDT is the fourth-largest cryptocurrency by capitalization, and its potential to pose systemic risks continues to be a topic of debate.
As we look ahead to the prospects for cryptocurrency in 2025, it’s clear that the landscape remains complex. Despite the challenges, the year following a halving event typically favors cryptocurrencies, particularly in the first three quarters. However, if the market experiences a sharp correction akin to 2021, it could expose vulnerabilities reminiscent of the 2008 subprime crisis.
Thus, it is imperative to implement effective management practices rather than relying solely on overarching regulations to guide both decentralized and traditional finance in the coming years.
— Jean-Philippe Serbera, Professor of Accounting and Finance, Associate Dean for Research, ESC Pau