Why Bitcoin rose to $100K US after Trump's election and where is it going now

Donald Trump has put cryptocurrency front and center in his path to the White House, driving the price of bitcoin to record highs and fueling a heated debate.

The incoming US president has even indicated the possible creation of a strategic reserve of bitcoin.

At the New York Stock Exchange this week, CNBC host Jim Cramer asked Trump if he would go ahead with such a plan.

“Yeah. I think so. We're going to do something great with crypto,” he answered.

Since Trump won the US election, bitcoin has risen above US$100,000 for the first time. Now, he's filling his administration with pro-crypto advisers, and appears to be backing the idea of ​​a US Treasury Department bitcoin reserve, which analysts say could the price increased another 50 percent. Supporters say it could put the US at the forefront of what they see as a technology breakthrough – while critics say it will further increase wealth inequality.

Trump's conversion to crypto

Trump is a recent turn on the issue of cryptocurrencies, once calling bitcoin “Scam” against the US dollar. But during the campaign, he announced himself as “the first major party nominee in American history to accept donations in bitcoin and crypto.”

It is unclear what prompted the change of heart. But he and his family to launch their own cryptocurrency during the recent campaign.

And he said, that was just the beginning.

“I am laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world,” he told a bitcoin conference in November.

He has also named billionaire David Sacks as his new “AI and crypto czar”.

Bags was part of the so-called PayPal Mafia, a group of founders and employees (including Trump associate Elon Musk) who built the financial technology company in the early 2000s, and which has since established key roles in other tech companies.

He has been a vocal supporter of bitcoin and cryptocurrency dating back as early as 2013.

“Bitcoin has the potential to be the next internet – the internet of money. I'm buying,” Posted on X on May 30, 2013when Bitcoin was trading for just $129. If he invested US$1,000 then, it would be worth almost US$800,000 today.

Now, Sacks has a key job within the next administration, shaping how the industry will be managed. In July, he posted on X that a clear legal framework is the main desire of the industry.

“If Trump wins, this industry will win, and more innovation will happen in the US”

Don't reserve a new idea

The idea of ​​a strategic reserve was gaining steam even before Trump won the election.

A bill proposed this summer by Republican Sen. Cynthia Lummis of Wyoming, a Trump ally, would require all bitcoins held by any federal agency to be transferred to the Treasury Department for safekeeping strategic bitcoin.

It would also order the Treasury secretary not to buy more than 200,000 bitcoins per year over five years, for a total of one million bitcoins.

The US Treasury would be required to hold these bitcoins for at least 20 years.

Crypto enthusiasts say the reserve would position the United States as a world leader in the world of cryptocurrency, which they see as the future of the financial system. They also say that Bitcoin will rise to all new heights if the new administration supports the idea of ​​a strategic reserve.

“I think it's headed for a range of $250,000 (US) to $500,000 (US per coin),” said analyst Ronnie Moas, founder of Standpoint Research.

Moas says that Trump's presidency has put a new wind in the crypto sails, and the moment a bitcoin reserve is announced, the price will spin again.

“(It) will move the price overnight between 25 and 50 percent because a flood of people will come in trying to jump in front of the government purchases, which will take months or weeks before you start. ,” Moas said this week.

Moas is not a fan of Trump, calling him an “idiot” and a “scam artist”, but he says he is right on bitcoin.

Others are just as convinced that bitcoin reserve funds are a fundamentally bad idea.

Among the commentators is Larry Summers, economist and former secretary of the US Treasury.

Summers says there might have been a reasonable argument for creating a strategic petroleum reserve or building gold reserves at Fort Knox a century ago.

He says that there is no such argument for buying billions of dollars in crypto, because it is still an unproven and volatile financial asset.

“Some of what's being said — this idea that we should have some kind of national bitcoin reserve — is crazy,” Summers said on Bloomberg Television's Wall Street Week with David Westin.

A well-funded point for a crypto-friendly government

The push for a friendlier administration in Washington is powerful and well-funded.

Crypto companies spent more than $133 million US supporting pro-crypto candidates in races across the United States in the November election, according to OpenSecretswhich tracks US campaign spending and lobbying. That would make up about a third of all direct corporate donations to super PACs (political action committees).

And not only the president won – many pro-crypto Senate and House candidates won in key races. Candidates who lobbied for more crypto restrictions lost.

Among them was Democrat Sherrod Brown, the current chairman of the Senate Banking Committee, and an outspoken critic.

In what is likely to be his final statement with the committee, Brown warned of the dangers of issues involving algorithmic pricing, AI and of course, crypto.

“All of these threats have one thing in common: They all have the potential (to) take even more money away from working Americans…

Last year in its first Cryptocurrency Fraud Report, the FBI found that American consumers lost more than $5.6 billion US last year through crypto-related fraud, an increase of 45 percent from 2022.

Just this week, Reuters reported that Trump's own crypto campaign has partnered with a platform that authorities and financial experts say has been used by criminals and militant groups backed by Iran, Hamas and Hezbollah.

Critics say the potential for fraud is all the proof they need that crypto should be kept from the mainstream. Supporters say it just underscores the importance of building what Sacks called “a clear legal framework to operate under.”

Either way, Trump's embrace of crypto has already brought new interest, new value and new concerns. And there are still five weeks until he formally takes office.