Bitcoin Surpasses $98,000 for the First Time: What You Need to Know

NEW YORK (AP) — Bitcoin, the leading cryptocurrency, has hit an impressive high of $98,000 on Thursday, marking a significant milestone as it continues its surge since the U.S. presidential election. The cryptocurrency has experienced a staggering increase of over 40% within a mere two weeks, capturing the attention of both seasoned investors and newcomers alike.

This rapid ascent signals that Bitcoin is knocking on the door of the monumental $100,000 mark, a stark contrast to its value of under $17,000 just two years ago, following the dramatic collapse of the FTX crypto exchange. The recent bullish trend in the market has coincided with growing optimism among industry stakeholders, who believe that the incoming Trump administration may adopt a more favorable stance toward cryptocurrency regulations.

Bitcoin was trading as high as $98,349 early Thursday, according to CoinDesk, although it settled slightly lower by 1:25 p.m. ET. As is often the case in the volatile world of cryptocurrencies, the future remains unpredictable. While some market analysts express optimism, others caution potential investors about the inherent risks involved in this fluctuating asset class.

Understanding Cryptocurrency: A Brief Overview

Cryptocurrency has become an increasingly common term, yet many still find themselves asking, “What exactly is cryptocurrency?” In its simplest form, cryptocurrency is a type of digital currency designed to function through a decentralized online network, meaning it does not rely on any central authority or government backing. Instead, all transactions are documented and secured using innovative technology known as blockchain.

Bitcoin stands as the oldest and most prominent cryptocurrency in the market. However, it is not alone; other digital currencies such as Ethereum, Tether, and Dogecoin have also garnered popularity and investment interest over time. Many investors view cryptocurrencies as potential digital alternatives to conventional money, but it is important to recognize that these assets can exhibit extreme volatility, heavily influenced by broader market fluctuations.

Why is Bitcoin’s Price Skyrocketing?

The recent surge in Bitcoin’s price is largely attributed to the political landscape following the U.S. presidential election. Crypto enthusiasts have greeted Trump’s electoral victory with optimism, hoping it will lead to the introduction of legislative and regulatory reforms that they have long sought. Generally speaking, these reforms are aimed at establishing a more legitimate framework for cryptocurrency trading while minimizing bureaucratic hurdles.

Previously a skeptic of cryptocurrencies, Trump has recently vowed to transform the U.S. into the “crypto capital of the planet.” Notably, he has proposed the creation of a “strategic reserve” of Bitcoin and has welcomed cryptocurrency donations for his campaign. Additionally, he actively participated in a Bitcoin conference, highlighting his newfound enthusiasm for the crypto sector through the launch of a trading venture called World Liberty Financial, co-founded with family members.

While the specifics of Trump’s crypto agenda remain to be seen, industry experts emphasize that this narrative is likely to unfold over a longer time frame. Citi’s macro strategist, David Glass, noted that rapid changes in U.S. crypto policy will take time to realize notable impacts on widespread adoption.

Research analyst Adam Morgan McCarthy from Kaiko believes that the cryptocurrency industry is thirsty for “just some sort of clarity.” Historically, regulatory approaches have been enforcement-driven, which successfully eliminated some bad actors from the space. However, comprehensive legislation is viewed as necessary to effectively address other key areas lacking oversight.

Gary Gensler, the current head of the Securities and Exchange Commission (SEC) has recently been active in pursuing a stricter regulatory framework, penalizing various crypto companies for breaches of securities laws. Notably, Gensler has announced his resignation as SEC chair, effective on Inauguration Day, January 20.

Despite the excitement surrounding Trump’s tenure and the potential for regulatory reform, McCarthy warns that 2024 is set to be a highly pivotal year for U.S. cryptocurrency regulations. This is reflected in significant milestones such as the recent approval of spot Bitcoin ETFs, which present a new avenue for investor engagement with Bitcoin. Spot ETFs have already begun to make substantial contributions to the Bitcoin market, driving record inflows observed since the election.

Bitcoin also experienced a significant event this year known as its fourth “halving,” which triggered a reduction in mining rewards. This built-in mechanism is designed to create scarcity and, theoretically, could lead to price increases in response to persistent demand. Yet, market analysts caution that the long-term effects remain uncertain.

Assessing the Risks Involved in Cryptocurrency Investment

When investing in cryptocurrencies, it is imperative to remember that the rapid price increases can be deceptive; losses can occur nearly as swiftly as gains can be made. The price behavior of cryptocurrencies tends to mirror broader market conditions, and trading occurs incessantly, every day of the week, making the landscape increasingly unpredictable.

For context, at the onset of the COVID-19 pandemic, Bitcoin was valued at just above $5,000. By November 2021, its worth soared to almost $69,000 amid heightened demand for technology assets, only to plummet shortly after as the U.S. Federal Reserve initiated aggressive interest rate hikes. The subsequent collapse of FTX in late 2022 severely compromised overall confidence in the cryptocurrency market, pushing Bitcoin’s value down below $17,000.

As inflation began to stabilize, many investors returned, buoyed by the recent excitement surrounding spot ETFs, driving Bitcoin’s price higher. Nevertheless, experts consistently advise caution, particularly for less affluent investors considering entering the market. A less strictly regulated environment could exacerbate risks in the absence of adequate protections.

While this has been a remarkable period for Bitcoin, McCarthy emphasizes that investors should remain vigilant for potential “corrections,” where prices may revert downward. Additionally, it is critical to recognize that certain digital assets might come with specific restrictions that others do not have.

“Keep your investment strategy simple and avoid taking on more risk than you can comfortably afford,” McCarthy cautioned, while noting that there is no “magic eight ball” to predict future movements in the market.

The Climate Impact of Cryptocurrency Mining

The process of “mining” cryptocurrencies like Bitcoin requires considerable energy consumption, leading to environmental concerns over its carbon footprint. In recent years, considerable attention has focused on the source of the energy used in mining operations, particularly when powered by fossil fuels.

Recent research from the United Nations University and published in the journal Earth’s Future highlighted that Bitcoin mining’s carbon emissions for the years 2020-2021 across 76 countries were equivalent to the emissions produced by burning approximately 84 billion pounds of coal or operating 190 natural gas power plants. Specifically, coal accounted for the majority (45%) of Bitcoin’s electricity needs, followed by natural gas (21%) and hydropower (16%).

Concerns surrounding the environmental impact of Bitcoin mining primarily center on the types of energy sources utilized. Some industry analysts argue that there has been a notable increase in the use of clean energy in the mining process in response to growing demands for more sustainable practices and climate protections.

How AI legalese decoder Can Assist Investors

With the complexities and risks associated with cryptocurrency investments, understanding regulatory frameworks can be daunting for investors. The AI legalese decoder is a valuable tool that can help demystify legal texts and provide clarity on pertinent regulations surrounding cryptocurrencies. By breaking down complex legal jargon into accessible language, the AI legalese decoder empowers investors to make informed decisions, ensuring that they grasp essential information and potential risks effectively.

Furthermore, the AI legalese decoder can streamline the process of navigating the evolving legal landscape of cryptocurrency, allowing investors to stay abreast of changes in regulations that could impact their investments. As the cryptocurrency sector continues to grow and evolve, having comprehensive legal understanding is crucial, making tools like the AI legalese decoder an essential resource for both seasoned and new investors embarking on their cryptocurrency journeys.