Donald Trump Re-Elected as U.S. President, Bitcoin Surges to Record High Following Victory
On November 5, Donald Trump was once again elected as President of the United States. Campaigning on a pro-cryptocurrency agenda, he pledged to reduce regulatory hurdles and accelerate Bitcoin’s growth. Following his victory, Bitcoin soared to an all-time high of $79,954 on November 10. The leading cryptocurrency has surged by 89.2% year-to-date, signaling a significant shift in the attitudes of institutions that previously dismissed Bitcoin. The pressing question has transitioned from whether Bitcoin should be included in institutional portfolios to how one could justify not having it. With advancements in regulations, ETF approvals, and Bitcoin’s infrastructure, the narrative surrounding this digital asset is evolving rapidly. Ignoring Bitcoin may soon be perceived as a major strategic error.
From Illegitimate to Institutionalised: The Regulatory Stamp of Approval
Historically, many institutions have steered clear of Bitcoin due to its perceived illegitimacy. However, recent regulatory approvals for Bitcoin exchange-traded funds (ETFs) have significantly altered this view. There is a growing institutional appetite for Bitcoin, exemplified by BlackRock’s iShares Bitcoin Trust (IBIT) which has seen substantial inflows this year. Additionally, the international market for digital asset ETFs is expanding, with offerings emerging in regions such as Hong Kong, Australia, Canada, and Europe. These ETFs are helping to transition Bitcoin from its speculative origins to a recognized asset class.
Dispelling the Intrinsic Value Argument
For years, detractors of Bitcoin argued that it lacked intrinsic value. Yet, the substantial investments in research and educational initiatives within the blockchain sector are reshaping this perspective. Various publications, think tanks, and educational centers are contributing to a deeper understanding of Bitcoin’s potential. Increasingly, institutional investors are beginning to view Bitcoin as “digital gold,” a finite asset that serves as a hedge against inflation and market volatility. The transparency provided by blockchain technology enhances Bitcoin’s appeal, allowing for the visibility and traceability of transactions—a feature that many traditional assets do not offer.
A New Frontier of Digital Gold and Payment Capabilities
The role of Bitcoin within the financial ecosystem has significantly matured, moving beyond mere speculation. Innovations in Bitcoin’s infrastructure, such as Layer 2 solutions and the Lightning Network, have solidified its status as both a store of value and a means of exchange. Notably, 2024 introduced two significant developments: the Bitcoin DeFi market (BTCFi) and the trend of Inscriptions, both emphasizing Bitcoin’s expanding functionalities. BTCFi, in particular, signifies a new category of financial products built on Bitcoin, enabling decentralized finance (DeFi) capabilities directly on the Bitcoin network. This allows for the issuance of fungible and non-fungible assets, which can be transferred via the Bitcoin main network or its layer-2 solutions, enhancing Bitcoin’s appeal for both retail and institutional investors.
Volatility Concerns? Comparing Bitcoin with Tech Stocks and Traditional Assets
While concerns about Bitcoin’s volatility persist, emerging data provides a more nuanced understanding. When juxtaposed with tech-oriented stocks, Bitcoin demonstrates a relative stability that contradicts common perceptions. Analysis of Bitcoin’s Sharpe Ratio over the past five years indicates that its risk-adjusted returns frequently outperform traditional assets. In an economic landscape marked by macroeconomic challenges and geopolitical uncertainties, identifying assets with similar potential returns is increasingly challenging. Bitcoin’s volatility is increasingly recognized as a beneficial feature, offering diversification opportunities that traditional investments may not provide.
Accessibility for Institutional Investors: A Growing Suite of Route-to-Markets
The notion that Bitcoin is difficult to access has become outdated. Institutions now have various direct exposure options through custodial solutions provided by companies like Coinbase Custody and Fidelity Digital Assets, which have expanded their institutional custody services to meet the needs of investors seeking secure storage. These custodial services adhere to regulatory standards, alleviating concerns regarding the risks of digital asset storage. Furthermore, the Bitcoin futures market has become fully institutionalized, with CME’s BTC Futures Open Interest surpassing $14.6 billion, giving institutional investors ample tools to hedge or speculate in a regulated environment. Passive exposure options, such as spot ETFs, have also been approved in the U.S., Hong Kong, Canada, Australia, and Europe, simplifying access for investors without requiring intermediaries.
Reconsidering Your Position: Can You Confidently Reject Bitcoin?
For a long time, institutions shied away from Bitcoin due to worries about its legitimacy, intrinsic value, accessibility, and volatility. However, these concerns have been systematically addressed. The approval of ETFs has legitimized Bitcoin; increased research and educational efforts have enhanced its perceived value; improved custody solutions and financial products have made it more accessible; and comparative analyses underscore its potential as a high-return asset. The critical question now is whether the traditional reasons for excluding Bitcoin remain relevant. The answers to this question may dictate whether institutions will be at the forefront of Bitcoin’s next surge or remain passive observers.
Institutional FOMO: The Driving Force Behind the Next Bitcoin Surge?
As Bitcoin’s legitimacy, infrastructure, and market accessibility continue to evolve, institutional interest is generating a phenomenon akin to “FOMO” (Fear of Missing Out). When large institutions enter the market, they often do so with significant investments, potentially driving up Bitcoin’s price. With Bitcoin nearing the conclusion of a market cycle and a halving event projected for 2024, analysts forecast the onset of another bullish trend. Historically, Bitcoin’s halving cycles have been associated with price increases, and some predict that this could propel Bitcoin’s price to $100,000 by year-end. Moreover, the implementation of new administrative policies in January may provide additional regulatory clarity, further encouraging institutional participation.
