Reasons for bitcoin's rise above $100,000

Donald Trump's recent embrace of pro-Bitcoin rhetoric is more the effect of increased hype around the most famous cryptocurrency than the other way around. A few facts.

On Thursday, December 5, Bitcoin surpassed the symbolic threshold of 100,000 U.S. dollars, setting a new record. As expected, media commentary has been pouring in in an attempt to explain this event. The majority of media outlets (24 heures, RTS, BBC, CNN…) seem to agree on one cause: Donald Trump’s election as president of the United States. In their defense, Trump did indeed take credit for this rise, saying, «Bitcoiners, you’re welcome.».

Setting aside political rhetoric, Bitcoin’s status has evolved significantly in recent months, both institutionally and in terms of market adoption… and this was well before Trump’s election. In fact, many observers believe that the Republican turned to Bitcoin—and its supporters—precisely because this cryptocurrency has gained popularity and respectability, and not the other way around.

Official Recognition

On January 11, the Securities and Exchange Commission (SEC), the U.S. financial regulator, approved the creation of Bitcoin ETFs, a highly anticipated financial product that gives investment funds access to this type of investment. This approval can be seen as recognition of Bitcoin by the authorities.

This was the most successful launch in history, reaching a trading volume of $4.6 billion on its very first day—a record for a launch. Ten months later, the value of the Bitcoin ETF (IBIT) even surpassed that of its gold counterpart (IAU), which had been established for several decades.

Since early January, Bitcoin ETFs have experienced explosive growth, now holding more than 1.2 million bitcoins, worth approximately $124 billion. This massive adoption has surprised and excited the financial world, marking a historic milestone in the integration of cryptocurrencies into traditional markets.

The rhetoric of key figures in the financial sector has also shifted significantly. On December 4—the day before Bitcoin surpassed the $100,000 mark—Jerome Powell, chairman of the U.S. Federal Reserve (Fed), described Bitcoin as ’a competitor to gold«. In July, Larry Fink, CEO of BlackRock, called it a »flight to quality.« Even Jamie Dimon, who had called Bitcoin a »fraud« in 2017, has since backtracked on his remarks, now acknowledging the technology’s potential.

Capital Preservation

The same is true of political figures. In 2021, El Salvador’s young president, Nayib Bukele, decided to adopt Bitcoin as the national currency. In 2023, Argentine President Javier Milei expressed support for Bitcoin and approved its use for financial transactions. Vladimir Putin also stated that Bitcoin «could not be banned and would continue to grow.» And in the United States, the Republican Party has taken a very favorable stance on this cryptocurrency and is expected to pass the «Bitcoin Act of 2024,» a law aimed at creating a federal reserve in Bitcoin.

This renewed legitimacy is also supported by its growing adoption by traditional financial institutions. Many companies have added Bitcoin and other cryptocurrencies to their balance sheets (Tesla, MicroStrategy, MetaPlanet, etc.) or offer this service to their customers. Notable examples include PostFinance and the cantonal banks of Zurich and St. Gallen, which regularly advertise these services.

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Furthermore, Bitcoin’s resilience in the face of numerous market turbulences helps bolster investor confidence. Although its price fluctuations can be volatile, Bitcoin’s appeal lies in its programmed scarcity and decentralized nature, which make it a unique asset, immune to monetary manipulation. The concept of a «flight to quality,» as mentioned by Larry Fink, reflects the growing confidence in Bitcoin as an alternative in the face of inflation and economic uncertainty.

Bitcoin is now viewed as a mature asset, capable of coexisting with traditional financial instruments while offering a unique value proposition: that of a digital store of value. This paradigm shift points to a future in which cryptocurrencies could play a central role in investment portfolios and the global economy.

Uncertainties that remain

However, challenges remain. Regulation remains a sensitive issue. While Bitcoin benefits from a relatively clear regulatory framework, the same cannot be said for the thousands of other cryptocurrencies. There is also uncertainty regarding future decisions by regulators in various regions of the world.

One thing is certain, however: Bitcoin has now gained recognition across all levels of society—something that still seemed unlikely just a few years ago. Its future within the global financial system looks increasingly promising.

Frédéric Jollien is an economist and cryptocurrency expert. As a member of the Liberal Institute’s committee, he is also involved in the «Bitcoin Initiative,» which aims to include this asset in the SNB’s reserves.

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