Bitcoin is on the verge of $100,000 as the post-election rally continues

Bitcoin topped $98,000 for the first time on Thursday, a near-daily all-time high since the US presidential election. The cryptocurrency has rocketed over 40% in just two weeks.

Now, Bitcoin is on the doorstep of $100,000 and investors don’t seem to be phased by any of the cautionary tales from cryptocurrency history of gravity or volatility.

Cryptocurrencies and related investments such as crypto exchange traded funds have surged as the incoming Trump administration is expected to be more “crypto-friendly” than the outgoing Biden administration.

By 8:30 a.m. ET, bitcoin was trading at $97,466 after hitting as high as $98,349, according to CoinDesk.

Yet the cryptocurrency markets are a wild place and it is impossible to know what will come next. And while some are bullish, other experts are warning of investment risks.

Here’s what you need to know.

Back up. What is cryptocurrency again? Cryptocurrencies have been around for a while but have come under the spotlight in recent years.

Basically, cryptocurrency is digital money. This type of currency is designed to operate through an online network without a central authority — meaning it’s usually not backed by any government or banking institution — and transactions are recorded with a technology called blockchain.

Bitcoin is the largest and oldest cryptocurrency, although other assets such as Ethereum, Tether and Dogecoin have gained popularity over the years. Some investors see cryptocurrency as a “digital alternative” to traditional money – but it can be highly volatile, with its price dependent on larger market conditions.

Why Are Bitcoin and Other Crypto Assets Rising? Many recent actions have been linked to the results of the US election.

Trump has evolved from a crypto skeptic to a crypto champion, promising to make the US the “crypto capital of the planet” and a “strategic reserve” of bitcoin. His campaign accepted donations in cryptocurrency and he attracted fans at a Bitcoin conference in July. He also started a new venture World Liberty Financial with family members to trade cryptocurrencies.

Crypto industry players welcomed Trump’s victory, hoping that he would be able to push through the legislative and regulatory changes they have long been lobbying for. Trump also promised that, if elected, he would oust Securities and Exchange Commission Chairman Gary Gensler, who is leading the US government’s crackdown on the crypto industry and has repeatedly called for more oversight.

Digital assets like bitcoin posted significant gains in the months leading up to the election, largely due to the early success of a new way to invest in the asset: spot bitcoin ETFs, which were approved by US regulators in January.

Citi analysts David Glass and Alex Saunders wrote in a research note two weeks ago that flows into spot ETFs “have been a dominant driver of bitcoin’s returns for some time and we expect this relationship to continue in the near term.” They added that spot crypto ETFs saw their biggest inflows on record in the days following the election.

In April, Bitcoin also saw its fourth “halving” – a pre-programmed event that affects production by cutting the reward for mining, or the creation of new Bitcoin, in half. When that reward decreases, so does the number of new bitcoins entering the market. And, if demand remains strong, some analysts say this “supply shock” could also help propel prices long-term.

What are the risks? History shows that the faster you make money in crypto, the faster you can lose it. Long-term price behavior depends on the larger market conditions. Trading continues every hour, every day.

At the start of the Covid-19 pandemic, Bitcoin was just over $5,000. By November 2021 its price had reached around $69,000, marked by high demand for technology assets at that time. Bitcoin later crashed during the Federal Reserve’s aggressive series of rate hikes aimed at curbing inflation. The collapse of FTX in late 2022 led to a significant drop in confidence in crypto as a whole and Bitcoin fell below $17,000.

Investors began to pull back in droves as inflation began to cool — and gains skyrocketed based on anticipation and then the initial success of spot ETFs. Experts still stress caution, especially for small-pocketed investors.

What about climate impact? Assets like Bitcoin are produced through a process called “mining”, which consumes a lot of energy. And operations that rely on polluting sources have been of particular concern over the years.

Recent research published by the United Nations University and Earth’s Future Journal found that the 2020-2021 carbon footprint of bitcoin mining in 76 countries was equivalent to the emissions from burning 84 billion pounds of coal or operating 190 natural gas-fired power plants. Coal satisfied most of Bitcoin’s electricity demand (45%), followed by natural gas (21%) and hydropower (16%).

The environmental impacts of Bitcoin mining largely boil down to the energy source used. Industry analysts maintain that clean energy consumption has increased in recent years, coinciding with growing calls for climate protection.