Key Takeaways
- Bitcoin rose above $98,000 for the first time on Thursday.
- This marks a 46% increase since Donald Trump was announced as the winner of the 2024 U.S. presidential election.
- Bitcoin-related stocks experienced the most trading volume in their history on Wednesday, with more than $50 billion in assets exchanging hands.
- Three more publicly traded companies have announced their intention to use bitcoin as a treasury reserve asset.
- Despite all this activity, Galaxy Digital CEO Mike Novogratz says a correction in bitcoin’s price is coming.
- This month, bitcoin also has gone from strongly correlated with gold to having an inverse correlation with the precious metal.
Bitcoin (BTCUSD) briefly surged past $99,000 Thursday, creating another price record as investors, big and small, can’t seem to get enough of the cryptocurrency.
The largest cryptocurrency by market capitalization has more than doubled in value this year, gaining over 130% year-to-date, and is now within striking distance of the $100,000 mark, a level unthinkable a year ago when it traded close to $37,000.
Donald Trump’s U.S. presidential election win earlier this month and the promise of a more crypto-friendly administration has propelled bitcoin prices 46% higher in a little over two weeks.
Investors also cheered the departure announcement for U.S. Securities and Exchange Commission Chair Gary Gensler on Thursday. Gensler faced criticism from the crypto industry for his enforcement approach.
Bitcoin-Hungry Investors Fuel Price Rally
Bitcoin is getting interest from investors, both retail and institutional.
Flows into the spot bitcoin exchange-traded funds (ETFs) also have been breaking records over the past few weeks. These products hold bitcoin and buy the cryptocurrency as more investors pour money into them, in turn driving bitcoin prices higher.
And these products not only are getting popular with retail investors. According to data analyzed by Coinbase, more institutional investors—such as hedge funds and investment advisers—bought into spot bitcoin ETFs in the third quarter than in the previous one.
Meanwhile, bitcoin-related stocks are also on the receiving end of massive action on Wall Street.
According to Bloomberg Senior ETF Analyst Eric Balchunas, what he refers to as the “Bitcoin Industrial Complex,” a collection of publicly traded companies and ETFs with direct or indirect exposure to the bitcoin price, posted a record of more than $50 billion in trading volume on Wednesday. Notably, MicroStrategy (MSTR), which pivoted to a strategy of acquiring bitcoin in 2020, recently has had stock trading volumes that rival the likes of Tesla (TSLA) and Nvidia (NVDA).
MicroStrategy holds more than 331,2000 bitcoin worth more than $32 billion at current prices on its books, and the company’s stock has risen more than 500% this year. That’s prompted many more publicly traded companies to take a leaf out of MicroStrategy’s bitcoin playbook.
While bitcoin miner Marathon Holdings (MARA) and health-care company Semler Scientific (SMLR) have done that in the past, Cosmos Health (COSM), LQR House (LQR), and Acurx Pharmaceuticals (ACXP) all made announcements about bitcoin purchases this week.
$100K in Sight, But Correction May Follow
The $100K price milestone may not be too far away, but many experts say that bitcoin may not sustain a breach of that level for too long.
Despite the strong interest from institutions, Galaxy Digital Chief Executive Officer (CEO) Mike Novogratz warned that a correction is on the way in an interview with CNBC Thursday morning. “The crypto community is levered to the gills, and so there will be a correction,” Novogratz said.
He expects bitcoin’s price to fall to $80,000 levels, which would represent a 20% drop from the $100,000 mark.
Bitcoin Shakes Off Its Correlation to Gold
Bitcoin’s original premise as an investment included the fact that it was decoupled from stock markets and instead was viewed as “digital gold.” Gold is often likened to a safe haven asset in times of turbulence in the stock markets.
Both bitcoin and gold have established multiple price records in the past few months; however, gold recently has faltered, with some experts even suggesting a rotation out of gold into bitcoin.
According to data from The Block, bitcoin’s 30-day Pearson correlation with gold has gone from 0.82 to -0.66 since Nov. 5, when the U.S. elections occurred.
This effectively means that bitcoin and gold have shifted from highly correlated to having an inverse correlation in a matter of weeks. That said, bitcoin is still highly correlated with the stock market, maintaining Pearson correlation scores of 0.7 and 0.76 with the S&P 500 and the Nasdaq as of Wednesday.
