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- Bitcoin has more than doubled this year
- Trump on Wednesday picked pro-crypto Paul Atkins to lead SEC
- Elon Musk, a major Trump ally, supports cryptocurrencies
- Crypto-related stocks have surged
Bitcoin catapulted above US$100,000 (NZ$170,000) for the first time on Thursday (US time), a milestone hailed even by sceptics as a coming-of-age for digital assets as investors bet on a friendly US administration to cement the place of cryptocurrencies in financial markets.
Once it broke US$100,000 in Thursday's Asian morning, boosted by US President-elect Trump's nomination of pro-crypto Paul Atkins to run the Securities and Exchange Commission, it was soon at an all-time high of US$103,619 (NZ$176,000). It last fetched US$101,139 ($NZ172,000), up about 3.2 percent on the day.
The total value of the cryptocurrency market has almost doubled over the year so far to hit a record over $3.8 trillion (NZ$6.46t) according to data provider CoinGecko. By comparison, Apple alone is worth about $3.7t (NZ$3.6t).
Bitcoin's march from the libertarian fringe to Wall Street has minted millionaires, a new asset class and popularised the concept of "decentralised finance" in a volatile and often controversial period since its creation 16 years ago.
Bitcoin has more than doubled in value this year and is up more than 50 percent in the four weeks since Donald Trump's sweeping election victory, which also saw a slew of pro-crypto lawmakers being elected to Congress.
"CONGRATULATIONS BITCOINERS!!! $100,000!!! YOU-RE WELCOME!!! Together, we will Make America Great Again!" Trump said on Truth Social, his social media network, on Thursday.
"We're witnessing a paradigm shift," said Mike Novogratz, founder and CEO of US crypto firm Galaxy Digital.
"Bitcoin and the entire digital asset ecosystem are on the brink of entering the financial mainstream - this momentum is fuelled by institutional adoption, advancements in tokenisation and payments, and a clearer regulatory path."
Trump - who once labelled crypto a scam - embraced digital assets during his campaign, promising to make the United States the "crypto capital of the planet" and to accumulate a national stockpile of bitcoin.
"We were trading basically sideways for about seven months, then immediately after 5 November, US investors resumed buying hand-over-fist," said Joe McCann, CEO and founder of Asymmetric, a Miami digital assets hedge fund.
Bitcoin's proponents cheered Trump's nomination of Atkins to the SEC.
A former SEC commissioner, Atkins has been involved in crypto policy as co-chair of the Token Alliance, which works to "develop best practices for digital asset issuances and trading platforms," and the Chamber of Digital Commerce.
"Atkins will offer a new perspective, anchored by a deep understanding of the digital asset ecosystem," said Blockchain Association CEO Kristin Smith.
"We look forward to working with him ... and ushering in - together - a new wave of American crypto innovation."
A slew of crypto companies including Ripple, Kraken and Circle are also jostling for a seat on Trump's promised crypto advisory council.
Part of the landscape
Bitcoin has proven a survivor through precipitous downturns.
Its move into six-figure territory is a remarkable comeback from a dip below $16,000 (NZ$27,200) in 2022 when the industry was reeling from the collapse of the FTX exchange. Founder Sam Bankman-Fried was subsequently jailed.
Analysts say the growing embrace of bitcoin by big investors this year has been a driving force behind the record-breaking rally.
US-listed bitcoin exchange-traded funds were approved in January and have been a conduit for large-scale buying, with more than $4b (NZ$6.8b) streaming into these funds since the election.
"Roughly 3 percent of the total supply of bitcoins that will ever exist have been purchased in 2024 by institutional money," said Geoff Kendrick, global head of digital assets research at Standard Chartered.
"Digital assets, as an asset class, is becoming normalised," he said.
It is already becoming increasingly financialised, with the launch of bitcoin futures in 2017 and a strong debut for options on BlackRock's ETF in November.
Crypto-related stocks have soared along with the bitcoin price, with shares in bitcoin miner MARA Holdings and exchange operator Coinbase each up around 65 percent in November.
Software firm Microstrategy, which has repeatedly raised funds to buy bitcoin and held an aggregate of about 402,100 bitcoins as of 1 December, has gained around 540 percent this year.
Trump himself unveiled a new crypto business, World Liberty Financial, in September, although details have been scarce and billionaire Elon Musk, a major Trump ally, is also a proponent of cryptocurrencies.
Some say the asset remains a speculative or investment vehicle and not an instrument for payments.
On Wednesday, Federal Reserve Chair Jerome Powell likened bitcoin to gold, "only its virtual, its digital".
"People are not using it as a form of payment, or as a store of value. It's highly volatile, it's not a competitor for the dollar."
While earlier big bitcoin rallies have been followed by significant pullbacks, its wider adoption now may help tamp down volatility, analysts said.
"That is not to say that there will not be 30-50 percent drawdowns over time, but my base case is that the nature of the drawdowns will be less severe than what we saw in the last bear market," Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, said.
"Passive flows into ETFs, a liquid options market, corporate treasury adoption, and nation state adoption will likely play a large role in dampening volatility," Farrell said.
Incoming future US President Donald Trump. Photo: ALON SKUY / AFP
'Who can prohibit it?'
Cryptocurrencies have been criticised for their massive energy consumption and use in crime around the world, and the underlying technology is far from delivering a revolution in the way money moves around the globe.
The US and Britain announced on Wednesday they had disrupted what they described as a global money laundering ring which used cryptocurrency to help rich Russians to evade sanctions and launder cash for drug traffickers.
Although calculations vary, the Cambridge University Centre for Alternative Finance estimates bitcoin uses around the same amount of electricity each year as Poland or South Africa.
Still, as Russian President Vladimir Putin pointed out at an investment conference on Wednesday: "Who can prohibit it? No one." And its longevity is perhaps testament to a degree of resilience.
"As time goes by it's proving itself as part of the financial landscape," said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney.
"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."
- Reuters