Trump hurls bitcoin to new records — will the rally endure?

The oldest and best-known cryptocurrency, bitcoin, was trading above $90,000 (€85,000) this week hitting a fresh all-time high amid a relentless rally that began on November 4 after Republican candidate Donald Trump was elected the next US president.

Jonas Groß, chairman of the Digital Euro Association — an organization that promotes digital payment systems — says Trump has declared himself to be the "crypto president" who will "lead the US to a pioneering role in bitcoin." Such promises have been made so far only by presidents of smaller countries, like [President Nayib Bukele of] El Salvador, Groß told DW. "It's no surprise that the crypto community is celebrating."

Though Trump had previously harbored a negative opinion about the cryptocurrency, he suddenly made a U-turn during the 2024 election campaign. At a major bitcoin conference in Nashville, for example, he promised to keep the crypto market largely unregulated and to make energy cheaper for the power-hungry mining of cryptocurrencies.

Generating new bitcoins and maintaining the so-called blockchain network on which all transactions are recorded requires significant energy.

What's fueling the rally?

Co-Pierre Georg, director of the Blockchain Center at the Frankfurt School of Finance and Management, attributes bitcoin's price surge primarily to "structural factors amplified by the US election."

Georg told DW that the approval by US market regulators in January of so-called exchange-traded funds (ETFs) in bitcoin made investing in the coin and other cryptocurrencies much easier. With ETFs, investors can profit from price movements by buying shares without owning bitcoin directly.

Georg noted that since regulatory approval, huge amounts of money have flowed into such ETFs, indicating that mainly institutional investors, like the world's largest asset manager, BlackRock, are fueling the rally. He said that direct purchases of bitcoin via crypto exchanges like Coinbase, Bitpanda, or Kraken haven't fundamentally changed so much recently.

Jonas Groß believes, however, that bitcoin's new all-time high mainly reflects sentiment and trust, similar to other publicly traded assets. While financial fraud dominated the headlines regarding bitcoin in the past, "it just needed a reason to lift spirits and get the machinery running again." Trump's soft regulatory approach to cryptocurrencies has "brought positive sentiment back," he added.

Lobbying by the crypto industry pays off

Bitcoin's most prominent foe in the US administration is Securities and Exchange Commission (SEC) head Gary Gensler, a staunch advocate of sweeping cryptocurrency regulation. Therefore, Co-Pierre Georg expects Trump to try to reorganize the agency overseeing US financial markets but said the incoming president can't simply replace Gensler without proving specific errors.

Georg also sees Trump's win as a victory for the crypto industry lobby. "At the moment, it appears that the industry has bought influence over the government and the new Congress," he said in a reference to Tesla CEO Elon Musk. The world's wealthiest man has proven an ardent fan of both cryptocurrencies and Donald Trump, whose campaign he supported with millions of dollars.

According to news agency Reuters, the crypto industry spent nearly $120 million on support for Trump and Republican candidates, with a significant portion of the funding dedicated to unseat Senate Banking Committee chairman and crypto critic Sherrod Brown from the Democrats. The campaign of Brown's Republican opponent, Bernie Moreno, was reportedly supported with industry donations of about  $40 million.

Where will it go from here?

While in the past, bitcoin broke records mainly in the wake of major companies accepting it as payment, such as PayPal in 2020, Georg sees "no such reasons" at the moment. "Bitcoin is completely unsuitable for payments, and it's also not reliable as a stable investment. The only real reason to buy bitcoin is speculative."

Jonas Groß is less skeptical, seeing some market fundamentals currently favoring the asset. "Bitcoin has established itself as a new asset class. The first pension funds are already investing, and in my view, it's only a matter of time before the first sovereign wealth funds enter the space. And then we're talking about an entirely different scale," he said.

Noting that markets have already "priced in Trump's promises," he warned, however: "If it turns out he doesn't deliver, prices could of course fall again."

For Co-Pierre Georg, predicting if the rally will continue under Trump is "like reading tea leaves." With bitcoin, he said, "you should only invest what you're prepared to lose completely." Moreover, he's wondering about the crypto industry and what it says that it "so strongly supports the election of a convicted criminal and political firebrand like Donald Trump, and then massively profits from his win."

This article was originally written in German.

Editor's note: This article, originally published on November 11, has been updated to reflect bitcoin's continued rally.