Bitcoin, the world’s largest cryptocurrency, reached a new milestone, topping $89,000 on Monday. This surge follows Donald Trump’s U.S. presidential victory, which many in the industry believe could bring more favourable crypto policies.
Analysts attribute the climb to optimism around Trump’s promises to make the U.S. “the crypto capital of the planet.” He has pledged regulatory clarity, including changes to the Securities and Exchange Commission (SEC), which has often called for tighter control over the crypto industry.
Read also: Cryptocurrency gains spiritual backing as Ghanaian Pastor supports Dogecoin investment
Understanding Cryptocurrency and Bitcoin’s role
Cryptocurrency, often described as digital currency, operates without centralised oversight, meaning any government or bank does not regulate it. Instead, it relies on blockchain technology to verify transactions. Bitcoin, launched in 2009, remains the most prominent cryptocurrency, though others like Ethereum and Tether have also gained popularity. While some view cryptocurrencies as digital alternatives to cash, these assets are highly volatile and influenced by broader market conditions.
What’s driving Bitcoin’s rally?
The industry has widely embraced Trump’s support for cryptocurrency. During his campaign, he accepted crypto donations and launched World Liberty Financial, a company focused on crypto trading. His support has inspired hopes that the administration will remove SEC chair Gary Gensler, who has pushed for crypto regulation. Analysts from Citi note that the anticipation of a “crypto-friendly” administration has fuelled the recent price surge. Additionally, new investment avenues like spot bitcoin ETFs, approved in January, have boosted investor interest and driven Bitcoin’s price higher.
Bitcoin’s price has historically been unpredictable, with sharp fluctuations that can lead to significant losses. For instance, Bitcoin reached nearly $69,000 in 2021, only to crash as inflation and interest rates rose. Similarly, FTX’s collapse in 2022 severely impacted investor confidence. While some anticipate further gains, experts advise caution.
“Invest only what you can afford to lose,” Susannah Streeter, head of money and markets at Hargreaves Lansdown cautioned, asking prospective traders to take the market’s volatility into account.
Read also: Lego falls victim to crypto scam
Environmental impact of Bitcoin mining
Bitcoin mining relies on vast amounts of energy, raising environmental concerns. According to recent studies, the carbon footprint of global bitcoin mining is equivalent to the emissions from burning 84 billion pounds of coal. Although the industry has increased its use of clean energy, coal remains a significant energy source.
The U.S. Energy Information Administration (EIA) reports that crypto mining now consumes up to 2.3 percent of U.S. electricity, prompting concerns about its environmental impact.
While the promise of a crypto-friendly administration has driven recent gains, Bitcoin’s volatility and environmental footprint continue to draw caution.