On Monday, Bitcoin hit an all-time high, climbing over 10% to $87,300, reaching a peak of $87,445.07, as reported by Coin Metrics. The leading cryptocurrency is exhibiting relentless momentum within the digital asset market. Kalshi data released on Tuesday indicates that 60% of users are wagering that the price of bitcoin could hit $100,000 before the end of January. Other digital currencies, like dogecoin, ethereum, and solana, are also seeing considerable increases.
There are rising expectations that cryptocurrencies may thrive in a favorable regulatory climate following Donald Trump’s potential return to the presidency and the favorable outcomes for pro-crypto candidates in Congress. The crypto sector has invested over $119 million supporting pro-crypto congressional candidates this year, according to Reuters.
Bitcoin functions as a cryptocurrency, a form of digital currency. Unlike traditional currencies such as dollars or pounds, bitcoin operates independently of any central bank, making it an appealing option for those who associate decentralization with liberation. However, one must recognize a significant drawback: its price can fluctuate dramatically, driven by buyer and seller activity. A total of 21 million bitcoins will ever be minted, and a significant portion is already in circulation.
Despite Bitcoin’s uptick, the SEC deems it a ‘volatile asset’
In January, the U.S. made a pivotal decision to accept bitcoin in mainstream investment vehicles. The approval of spot bitcoin exchange-traded funds (ETFs) now enables individuals to invest directly in bitcoin through the stock market. Nevertheless, the U.S. Securities and Exchange Commission (SEC) emphasized that it does not support bitcoin and took measures to inform the public about its associated risks.
“Bitcoin is fundamentally a speculative, volatile asset that is also associated with illegal activities such as ransomware, money laundering, evasion of sanctions, and terrorist funding,” stated Gary Gensler, SEC chairperson, back in January.
“Investors must be vigilant about the numerous risks linked to bitcoin and other products tied to cryptocurrencies,” he continued.
This year, during a speech in Nashville, Trump pledged to make the U.S. “the crypto capital of the world,” promising favorable regulations and the establishment of a U.S. bitcoin strategic reserve. Sen. Cynthia Lummis from Wyoming is a key supporter of this initiative and is known for her advocacy of crypto-friendly policies. In July, Lummis proposed the Bitcoin Act, which outlines the creation of a decentralized network of secure bitcoin vaults to be overseen by the U.S. Treasury. The objective is for the government to acquire up to 200,000 BTC annually over five years, potentially amassing 1 million BTC—about 5% of the total supply of bitcoin.
When bitcoin backfires: Lost fortunes and litigation
The world of bitcoin is a high-stakes environment, and despite its popularity, it is far from being a completely secure or dependable investment. The decentralized framework of cryptocurrency means that recovery isn’t straightforward like resetting a password or seeking help from customer service—support is nearly non-existent.
Consider the situation of James Howells—a man who could be possessing unimaginable wealth if he hadn’t thrown it away accidentally. For over ten years, the 38-year-old has been striving to recover a hard drive containing 8,000 bitcoin, now estimated to be worth approximately $290 million. With local officials preventing his attempts to search through a landfill, Howells is left on his own with only a lawsuit and the haunting loss of potential millions.
The fallout from the FTX scandal
Among the numerous scandals that have shaken the cryptocurrency landscape, few compare to the downfall of Sam Bankman-Fried. The former CEO of FTX was sentenced to 25 years in prison earlier this year after being found guilty of defrauding billions from his clientele. Once a leader in cryptocurrency exchanges, FTX enabled users to trade digital currencies like bitcoin, ethereum, ripple, and tether. Under Bankman-Fried’s leadership, the company abruptly collapsed in November 2022, locking millions out of their accounts. Prosecutors disclosed that he misappropriated over $10 billion in customer funds, diverting it to extravagant expenses like luxury homes, private jets, and bribes to Chinese officials.
Bitcoin faces considerable hurdles in gaining acceptance from a global audience that remains cautious about its risks and volatility. Similar to many high-risk investments, it is susceptible to dramatic boom-and-bust phases, and depending on the timing of your purchase, it could result in substantial wealth or total loss. Investing in bitcoin necessitates a strategic and calculated mindset, and while it may promise financial liberation, that comes with its own set of challenges. Whether it represents the future of finance or merely a risky gamble is for each individual to determine, but its skyrocketing value certainly has captured widespread attention.
