Bitcoin’s success has revolutionized the world of finance, growing from a niche digital currency into a global phenomenon. Launched in 2009, it has gained recognition for its decentralized nature, offering an alternative to traditional banking systems. As both a store of value and a medium of exchange, Bitcoin has garnered widespread interest from investors, institutions, and even governments including the interest of president-elect Donald Trump.
Bitcoin’s value continues to achieve record heights
Bitcoin is currently on track to have its best monthly performance since February. The recent election of Trump has upped its value by 45%. The increase in value can be attributed to Trump’s placement of pro-crypto lawmakers being elected to Congress including Trump himself. This shift in political influence has led to growing confidence in cryptocurrency markets, as more support for crypto-friendly policies could accelerate the mainstream adoption of digital currencies, further bolstering Bitcoin’s price and its status as a leading asset.
Bitcoin’s value has more than doubled since the beginning of this year. The approval of U.S-listed bitcoin exchange-traded funds (ETFs) in January this year have also helped boost the market. Bitcoin has been up by a whopping 130% this year. “The longer it survives it is taken more seriously, that’s just the reality of things,” said Shane Oliver, chief economist and head of investment strategy at AMP Sydney, “as an economist and investor I find it very hard to value it…it’s anyone’s guess. But it does have a momentum aspect to it and at the moment the momentum is up.”
Bitcoin nearly hits $100,000
Bitcoin broke the $75,000 mark with the election of Trump in early November. On the 21st, it came close to finally breaking the $100,000 ceiling. Despite the evident growing success of the cryptocurrency, many people remain suspicious of it. However, policy developments regarding Bitcoin such as the January approval of U.S-listed bitcoin ETFs may help to increase public trust.
“There have not been any ETFs like this before,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals. “There are ETFs that invest in stocks of companies that do business in the crypto industry, such as exchanges and miners, and there are ETFs that trade futures in bitcoin, which is like buying equity options instead of stocks, but until now there have not been any ETFs that directly invest in and own bitcoin.”
Tempted to buy into Bitcoin? Here is what you need to know
If you are stating to warm up to the idea of adding Bitcoin to your investment portfolio, there are numerous things to consider. Bitcoin and other cryptocurrencies are considered speculative investments, meaning people invest in them with the expectation that their value will rise quickly. These assets are highly volatile, and investors hope to profit from price fluctuations, though there is also significant risk involved.
“Normally, the way you think about a financial asset is you’re providing capital to the company,” said Michael Finke, a professor of wealth management at The American College of Financial Services. “The company uses that capital to make something, and the people buy it. That creates profit. You can value the company based on the profitability you expect in the future. With bitcoin, it’s not producing anything, so the valuation is entirely speculative.”
While Bitcoin’s price has surged over 600% in the past five years, it differs from traditional investments like stocks. Unlike companies that create products and pay dividends, Bitcoin’s value is largely speculative and has limited real-world usage. Additionally, the wealth generated by the stock market often comes from reinvested dividends which compound over time allowing for steady growth. Bitcoin, on the other hand, does not offer the same opportunity for compounding or reinvestment.
