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, and its price depends on major market conditions.
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Why are bitcoin and other crypto assets going up?
Many recent actions are related to the outcome of the US election.
Trump has changed from a crypto skeptic to a crypto champion and has pledged to make the US the “crypto capital of the world” and create a “strategic repository” for bitcoin. His campaign is accepting donations in cryptocurrency and showed supporters at a bitcoin conference in July. He also launched World Liberty Financial, a new family-owned cryptocurrency exchange.
Crypto industry players have welcomed Trump’s victory, hoping that he will be able to implement long-pleading legal and regulatory changes. Trump had also promised, if elected, to remove the chairman of the Securities and Exchange Commission, Gary Gensler, who has been leading the US government in the crypto industry and has repeatedly called for more oversight.
Digital assets such as bitcoin have posted significant gains in the months leading up to the election, mainly due to the initial success of a new asset investment method: spot bitcoin ETFs, approved by US regulators in January.
Entry into spot ETFs “has been the dominant driver of bitcoin returns for some time, and we expect this relationship to continue in the near term,” Citi analysts David Glass and Alex Saunders wrote in a research note two weeks ago. They added that spot crypto ETFs saw the largest inflows on record in the days following the election.
In April, bitcoin also saw its fourth “halving” – a planned event that affects production by cutting the mining reward, or the creation of new bitcoin, in half. When that reward falls, so does the amount of new bitcoins entering the market. And, if demand remains strong, some analysts say this “supply shock” could help propel the price for a longer period of time.
Read more about the reaction of the crypto markets to the results of the US election.
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