What is driving Bitcoin's rally as it surges past the $89,000 milestone?

As Bitcoin reaches new heights following the US elections, we explore the key factors driving this surge and what it means for investors

Is the crypto winter finally over? After years of stagnation and fading interest, the cryptocurrency market has come roaring back to life. Bitcoin prices have surged, not only surpassing their previous high but doing so by a substantial margin, signalling a potential end to the long ‘crypto winter’ for digital currency enthusiasts. On Tuesday, Bitcoin approached the $90,000 mark, reaching $89,250, fuelled by optimism surrounding Donald Trump’s election as US president and the anticipation of a potentially crypto-friendly administration. 

Bitcoin, the world’s largest cryptocurrency, has become the centre of market activity following the US presidential election, climbing to $89,637 in Asia—a rise of over 25 per cent since November 5.

 

 

According to CoinGecko, the total market value of cryptocurrency assets is now about $3.1 trillion, driven by speculative trading and excitement over possible pro-crypto policies under the new administration.  

???? pic.twitter.com/c9w0CFNdP0

— Bitcoin (@Bitcoin) November 12, 2024

 

  During his campaign, Trump pledged to turn the United States into a global hub for digital assets and build a national reserve of Bitcoin.

 

While the specifics of this pledge remain unclear, it has sparked a wave of speculative interest in crypto mining and trading stocks.

 

Crypto miner Riot Platforms surged nearly 17 per cent on Wall Street and continued to rise in after-hours trading, while other miners, including MARA Holdings and CleanSpark, saw gains of nearly 30 per cent.

 

MicroStrategy, a software firm and major Bitcoin investor, announced it had purchased around $2 billion worth of Bitcoin between October 31 and November 10, leading to a 26 per cent spike in its stock price, with gains continuing after hours.

 

The rally has also extended across the crypto market, lifting smaller tokens like Ether and even Dogecoin—originally created as a meme currency.

 

Crypto investors are hopeful that the heightened scrutiny by US Securities and Exchange Commission Chair Gary Gensler, whom Trump has vowed to replace, may soon ease. Trump also launched a new crypto venture, World Liberty Financial, in September.

 

What’s driving the Bitcoin rally? 

This post-election surge aligns with a historical trend: Bitcoin has often gained after US presidential elections. Following Obama’s 2012 win, Bitcoin rose 87 per cent in 90 days. It gained 44 per cent after Trump’s 2016 victory and surged by 145 per cent after Biden's 2020 win. Each election year has coincided with a Bitcoin halving, a four-year event that cuts mining rewards by 50 per cent.

 

Much of the current rally is fuelled by speculation about potential pro-crypto regulatory changes in the United States. Bitcoin’s value increased by 8 per cent in a day after the election, amid reports that Trump may appoint crypto-friendly figures to key regulatory roles.

 

Reports suggest Trump is considering pro-crypto officials like Mark Uyeda and Paul Atkins to replace current SEC Chair Gary Gensler. This move could ease regulatory pressures on the industry. Mudrex CEO Edul Patel noted that breaking the $89,500 resistance level was a significant milestone for Bitcoin, which has now stabilised around $88,300.

 

Institutional investors pile into crypto 

The rise in Bitcoin’s value has also been driven by growing interest from institutional investors. Earlier this year, the United States approved Bitcoin exchange-traded funds (ETFs), allowing institutions easier access to Bitcoin, which has boosted demand. ETFs let individual and institutional investors gain exposure to Bitcoin without directly handling the cryptocurrency.

 

Trump’s pro-Bitcoin stance has further encouraged institutions to invest, anticipating regulatory changes that might benefit them. Trump noted that nearly 30-40 per cent of Americans already hold crypto, suggesting that a favourable government stance could spur even more demand.

 

Trump has also unveiled his own crypto venture, World Liberty Financial, which has raised nearly $15 million through token sales. However, these tokens do not currently provide ownership or tradable value.

 

The rally is also attributed to the Federal Reserve’s recent rate cut of 25 basis points in November, which shifted investor sentiment towards alternative assets. The change in monetary policy signals a more accommodative approach, boosting interest in assets like Bitcoin as inflation concerns ease.

 

Impact on other cryptocurrencies 

Bitcoin’s gains have positively influenced other digital assets, especially Ethereum, which climbed to $3,200. As Bitcoin often sets the tone for the broader cryptocurrency market, Ethereum’s rise mirrors Bitcoin’s record-breaking run.

 

Other cryptocurrencies joined the rally: Ether surged over 7 per cent to $3,371, Cardano increased by 4.7 per cent, and Dogecoin saw a 24 per cent jump. Digital asset-linked stocks also rallied, with Coinbase closing up nearly 20 per cent and MicroStrategy rising more than 25 per cent in extended trading.

 

Should you join the rally now? 

While the outlook seems promising, analysts caution that the cryptocurrency market remains highly volatile. Many altcoins still face regulatory uncertainty and lack clarity on their funding mechanisms. However, a pro-crypto stance in the United States may create a favourable environment not only for Bitcoin and Ethereum but also for altcoins as regulatory frameworks are developed.

 

This shift could sustain a bullish market trend for the next one to two years, potentially lasting throughout Trump’s term.

 

Despite the positive momentum, experts urge caution, noting that the crypto market can experience rapid declines as well as gains.

 

What does the future hold for cryptocurrency? 

Current market conditions have led to a rise in long positions in Bitcoin futures, with investors betting on continued price increases. While this speculative activity may heighten volatility, it also presents profit opportunities for well-timed trades.

 

If supportive regulatory measures continue, more institutional participation is likely, potentially marking the end of the ‘crypto winter’ and solidifying the digital asset market.

 

Bitcoin’s next target of $100,000 could be within reach with sustained institutional backing, expanding ETF markets, and favourable regulations.

 

Due to its limited supply, decentralisation, and growing acceptance, Bitcoin remains a strong candidate for a diversified investment portfolio.

 

The rally has also impacted BlackRock’s spot Bitcoin ETF, which recently saw record trading volumes of $4.5 billion, indicating strong mainstream investor interest. Other cryptocurrencies like Ethereum and Solana have similarly benefited, pushing the overall market cap to $3.1 trillion.

 

Investment experts continue to advise diversification. The upward momentum in Bitcoin suggests broader market trends could provide further opportunities for gains across various digital currencies.