Bitcoin, which could benefit from relaxed regulation, soared to an all-time high and topped $76,000.
Bitcoin rallied Wednesday 6th November 2024, hitting all-time highs as former President Donald Trump defeated Vice President Kamala Harris to win the election an become the 47th U.S. president.
The price of Bitcoin touched a fresh record of $76,493.86.
Bitcoin one-month chart as of 6th November 2024 – New high!
Bitcoin hits new all-time high of $76,493.86 6th November 2024
Trump’s support for crypto
The ‘noises’ around the Trump trade for crypto are reportedly of deregulation, potential tax cuts for an asset that is both held long term but also day traded, less dependency on government financial institutions and the Fed and maybe seen as an alternative as a decentralised currency. Trump has previously indicated support of risk assets and the growth of crypto.
Ether surged 11%, while Solana, rocketed 13%. Payment system token XRP jumped more than 5%. Meanwhile, Meme coins soared, with Dogecoin up more than 15%.
Shares of Coinbase surged around 31%%, posting its best day on record since its first day of trading. MicroStrategy, which has a high correlation play on the price of Bitcoin, advanced 13%.
Cryptocurrencies fell on Tuesday evening 1st October 2024, with Bitcoin retreating to the $60,000 level following an unstable beginning to what is typically one of its best performing months.
Shares associated with digital currencies also fell in after-hours trading. Crypto exchange Coinbase saw a decline of about 1%, and MicroStrategy experienced a 2% drop, following a decrease of 7.4% and 3.5% at the close.
Escalating conflicts in the Middle East have curbed investors’ appetite for risk as the new trading month and quarter got underway. On Tuesday 1st October 2024, Iran executed a ballistic missile strike on Israel in response to the recent assassination of Hezbollah leader Hassan Nasrallah and an Iranian commander in Lebanon.
The growing turmoil in the Middle East has driven oil prices higher and bolstered the U.S. dollar, casting a shadow over Bitcoin and other speculative assets.
New rules and risk assessments for UK Crypto traders
Coinbase and Gemini, for example, are among cryptocurrency exchanges that now require U.K. users to fill out risk assessments. These questionnaires are designed to test their financial knowledge.
The measures are a response to new rules in the UK. The rules require crypto companies to clearly inform users of the risks involved in trading cryptocurrencies. If a customer fails to successfully complete the requests, they will be prevented from trading with their crypto account.
Risk warning
Crypto.com, Coinbase, Gemini and other cryptocurrency exchanges are warning UK users that they’ll need to complete investment questionnaires. Thes are aimed at testing their financial knowledge before being allowed to trade.
The companies have told UK users they are required to complete a declaration about what type of investor they are. Traders are required to respond to a set of questions on financial services to permit use of their platforms.
Clients’ declaration
In the client’s declaration section, users are asked to select their investor profile. A trader is directed to inform the company of their financial status.
Questions such as: are you a high-net-worth customer earning above £100,000 per annum or with a net worth of more than £250,000? Or, are you a ‘restricted investor’ who won’t invest more than 10% of their assets. If clients do not complete the requests, they are prevented from trading crypto related products.
The financial questionnaires, require users to respond to numerous questions about the range of products available. They want the client to fully understand the potential volatility of crypto assets.
Strict rules to protect the retail trader
Since the UK passed the Financial Services and Markets Act, companies that offer crypto assets and certain types of digital currency, known as stablecoins, are now covered by UK law.
These are the same rules as those that govern traditional financial services and are aimed at protecting the retail trader.
After years of regulatory rejection, the U.S. Securities and Exchange Commission on Wednesday 10th January 2024 finally approved the Bitcoin EFT.
It has approved what are known as ‘spot’ Bitcoin Exchange-Traded Funds (ETFs), which can be purchased by anyone from pension funds to retail investors. This now means that some of the biggest asset managers in the world, including BlackRock and Fidelity can trade a crypto related ETF.
Now, instead of using a crypto asset exchange such as Binance, Coinbase or Kraken to purchase and hold a token like Bitcoin, traders can now trade a ‘spot’ Bitcoin ETF for direct exposure to the digital asset market.
It may also mean that investors could pay lower fees than they would if they bought the digital currency from a crypto exchange directly.
Basically, it is now cheaper than ever to buy Bitcoin – but is this positive for the long-term?
Crypto fans can now invest in Exchange-Traded Funds (ETFs) – but what exactly are they?
A Bitcoin ETF allows investors to buy a product that tracks the price of Bitcoin through the same method they already use to buy stocks and other existing products. This also reduces additional worry of managing their crypto related holdings, which typically involves maintaining a cryptocurrency wallet and a safe storage system to safeguard that investment.
But what exactly is an ETF?
ETFs are holdings or portfolios that allow investors to ‘bet’ on multiple assets, without having to buy any themselves. Traded on stock exchanges like shares, their value depends on how the overall portfolio performs in real time.
An ETF could comprise a combination of gold and silver bullion, for example, or a mixture of shares in both big technology and energy companies. Some ETFs already contain Bitcoin indirectly – but a spot Bitcoin ETF will buy the cryptocurrency directly, ‘on the spot’, at its current live price, throughout the trading day.
Bitcoin, the first cryptocurrency
Based on an idea by someone called, Satoshi Nakamoto, Bitcoin was the first cryptocurrency and remains the most valuable and famous to-date. Its price is often seen as a barometer for the whole industry of thousands of other coins (altcoins), tokens and products built on the same blockchain technology.
Art illustration of Bitcoin blockchain
And with an influx of new money, many expect a surge in interest in cryptocurrency technology in general.
How will the decision affect cryptocurrency adoption and is this decentralisation as originally intended?
Some say this decision shows the existing ‘old financial school’ establishment is finally taking Bitcoin seriously, at least as a speculative asset. For those who consider Bitcoin legitimate ‘digital gold’, what better proof could there be than the biggest wealth-management institutions flocking to buy, and now overseen by regulators?
Others say cryptocurrency is about rejecting traditional financial systems in favour of a decentralised, people-powered alternative. And investment bankers buying Bitcoin just to get rich on U.S. dollars is not what Satoshi Nakamoto had in mind.
But judging from the chatter on social media, the prevailing sentiment is expecting the new cash injection will make existing Bitcoin investors and owners rich.
What are the risks to future investors?
It is possible to lose all of your investment
The price of Bitcoin can change rapidly and often without warning or explanation – it is a volatile asset. So investors will need to be aware when investing in ETFs linked to a digital coin.
Art illustration of Bitcoin trading
But ETFs are often sold as high-risk, high-reward products anyway. It is EXTREMELY high risk – don’t do it if you don’t understand it and even if you do, or think you do – BE CAREFUL! These products can rip the shirt off your back!
Cyber-crime risk
Another potential risk is cyber-crime. Bitcoin and other cryptocurrencies have been the subject of huge and costly attacks that have seen crypto companies drained of sometimes hundreds of millions of dollars overnight. And if the likes of Blackrock become major holders of Bitcoin, their cyber-security will be tested in ways never before. Let’s hope their security systems are extremely robust.
Cost of mining coins
Another downside is the heavy cost to the environment is that Bitcoin use a massive number of powerful computers around the world, to process transactions on the blockchain ledger and to create coins – this is known as mining.
Renewable energy use is growing – but it remains to be seen how investment companies will tackle the environmental cost of Bitcoin.
Be careful
ETFs are here now – but BE CAREFUL when entering a Bitcoin related ETF trade or investment, or any type of ETF for that matter. If it goes wrong, you will lose your money, and quickly.
Crypto related stocks climbed Monday 8th January 2024 as the price of Bitcoin increased again to its highest level since April 2022.
Crypto exchange Coinbase rose 3%, while Block and Robinhood, which also offer Bitcoin trading services, added 3% and 5%, respectively. Mining stocks enjoyed gains too: Marathon Digital and Riot Platforms advanced some 8% each. CleanSpark and Iris Energy both added 6%.
ETF decision closer
Bitcoin rallied above $47,000 as BlackRock, Grayscale and other potential Bitcoin ETF issuers submitted final updates to the Securities and Exchange Commission (SEC), that bolstered investors’ confidence that a likely positive decision is due soon.
Bitcoin 24-hour chart Monday 8th – Tuesday 9th January 2024
For true cryptocurrency bulls, the most lucrative investments in 2023 were in the stock market.
While Bitcoin rallied over 150% for the year, shares of Coinbase, Marathon Digital, MicroStrategy and the Grayscale Bitcoin Trust, which are all tied closely to the digital currency, did substantially better, rising more than 300% in value. Bitcoin miner Marathon Digital soared some 688%.
Outperform
Not only have these stocks outperformed primary cryptocurrency, but they’ve been among the biggest gainers across the whole U.S. stock market. In the universe of publicly traded U.S. businesses with a market value of at least $5 billion, the four Bitcoin-tied stocks were among the eight best performers, according to analysts.
Boom or bust?
The crypto boom represents a major recovery from 2022, when coin prices plummeted, taking related equities down with them. A year highlighted by hedge fund collapses, crypto lender failures and crippling losses at miners was punctuated in November 2022, when crypto exchange FTX spiralled into bankruptcy, leading to the arrest of founder Sam Bankman-Fried on fraud charges.
A jury in New York convicted Bankman-Fried on seven criminal counts
Bankman-Fried conviction
In 2023, a New York jury convicted Bankman-Fried on seven criminal counts, setting the 31-year-old former billionaire up for a possible long-stretch behind bars. Weeks later, Changpeng Zhao (CZ), founder of crypto exchange Binance, pleaded guilty and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice. He faces a possible prison sentence of 18 months or longer.
By the time of Bankman-Fried’s conviction and Zhao’s plea deal, the damage to the broader crypto market had mostly been realised, and investors were looking to the future. One of the biggest drivers for bitcoin this year was an easing of the Federal Reserve’s interest rate hikes, which created a more attractive case for riskier assets, but only marginally.
Bitcoin halving due May 2024 & ETF’s
Prices were also bolstered by the upcoming Bitcoin halving, which takes place every four years and is scheduled for May 2024. In the halving process, the reward for mining is cut in half, capping the supply of bitcoin.
Additional buying was sparked by the potential for a flurry of bitcoin exchange-traded funds popping up in the new year.
Marathon
Among companies closely tied to Bitcoin, the best-performing stock this year was Marathon, a mining firm that just eclipsed that market cap level last week thanks to a 125% surge in December as of Tuesday’s close. On Wednesday, the shares surged another 15%.
Last year at this time, Marathon was hanging on by a thread. The company was in the midst of a quarter that ended with a loss of almost $400 million on sales of just $28.4 million because of tumbling bitcoin prices
Mining
Bitcoin mining is an expensive operation because of the high energy costs required to operate the supercomputers. A drop in bitcoin prices means a sharp reduction in the money producers make selling the coins they mine, even as their energy bills get little relief.
Outside of the mining universe, the best-performing crypto stock in the U.S. this year is Coinbase, which has soared some 386% into 2023 year end.
Coinbase
As the only major publicly traded crypto exchange in the U.S., Coinbase has long been a popular way to buy and trade cryptocurrencies in its home market. But with the struggles at Binance, the largest exchange in the world, Coinbase picked up useful market share during non-U.S. trading hours, according to a report from research firm Kaiko in late November 2023.
Binance is still open for business(Art illustration of a fictitious crypto trading room)
Shortly after Zhao’s plea deal, Coinbase CEO Brian Armstrong reportedly said that the news amounted to ‘a vindication of the long-term strategy that we’ve taken to focus on compliance, make sure we were building a trusted company.’
Coinbase’s revenue and stock price are still way below where they were during the heyday of crypto trading in 2021, when retail investors were jumping into the market to buy all sorts of digital currencies, including gimmicks like Dogecoin.
But the business has stabilized following drastic cost-cutting measures starting last year and extending into early 2023.
