The Rise of Bitcoin: How Donald Trump’s Support is Transforming the Cryptocurrency Landscape
The supply of Bitcoin is already scarcer than that of gold. With Donald Trump openly endorsing cryptocurrencies, new investors like pension funds and wealthy families are expected to jump on board.
The Messiah of the Crypto Industry: Donald Trump at the Bitcoin Conference in Nashville, Tennessee.
Donald Trump’s victory is driving up the price of Bitcoin significantly. On the election night alone, the price of the leading cryptocurrency surged by 10 percent, reaching over $93,000 in the days following – yet another record high.
Trump promises to create favorable regulations for digital assets, establish a state Bitcoin reserve, and position the USA as the global hub of the industry.
This marks a spectacular turnaround. During his first term, the Republican referred to Bitcoin as a “fraud.” Whether Trump is truly a believer or primarily aimed to pocket the industry’s million-dollar donations for his campaign remains unclear: another ideological shift seems unlikely.
A Matter of Faith
Trump’s allies, from Vice President J.D. Vance and “Mr. Dogecoin” Elon Musk to the designated Attorney General Matt Gaetz, are staunch crypto supporters.
It must be acknowledged that a few years ago, doubts existed about Bitcoin’s ability to prevail and attain the status of “digital gold.” It’s akin to a religion: it only becomes a reality when a significant number of believers trust in its message.
With a market value of nearly $1.8 trillion and a growing number of proponents from politics, banks, and even academia, this critical mass seems to have been achieved: many experts believe that Bitcoin will at least match gold in the future.
More Gold is Mined than Bitcoin
However, the market value of all gold reserves still surpasses that of Bitcoin by multiples. Yet, Bitcoin is already a much scarcer asset than gold. This can be observed through the ratio of the current available supply and the production rate.
There are an estimated 212,600 tons of gold in the form of jewelry, bars, coins, etc. Approximately 3,600 tons of gold are mined annually, adding to this supply. If production remains at its current level, the gold supply will double in 59 years.
In contrast, it would take 120 years to double the current Bitcoin supply. Furthermore, while it is possible that at least as much gold will be mined in the future as it is now, this is not the case for Bitcoin. Since April, only half as many new Bitcoins have been added to the supply. By 2028, it will be a quarter, and 4 years later, an eighth. In total, there can never be more than 21 million Bitcoins.
At Least 2 Million Bitcoin are Lost
In addition, the actual supply is likely significantly smaller than the 19.7 million Bitcoins “mined” to date. “Estimates suggest that at least 2 to 3 million Bitcoins are lost forever,” says Phil Lojacono, Vice President of the Bitcoin Association. In other words, at least 10 percent of all Bitcoin owners have misplaced the digital access key to their holdings. And that’s the end of the story. Unlike Bitcoin, gold is rarely lost.
It will be interesting to see at what price supply and demand will converge. The acceptance of Bitcoin is rapidly growing, especially among investment professionals. A recent survey conducted by Bank Sygnum among 400 institutional investors indicates this trend: 57 percent stated they intend to increase their exposure to crypto assets in the future.
Entry Barriers are Low
“Bitcoin has mainly been purchased by retail investors, hedge funds, and family offices so far. However, many institutional investors like pension funds or insurance companies are currently preparing for market entry,” says Hany Rashwan, founder of the crypto provider 21Shares. “Their demand will become evident in the coming year.”
Rashwan’s Zurich-based firm offers a wide range of exchange-traded funds (ETFs) that make investments in cryptocurrencies as easy to trade as stocks or bonds. Such ETFs on Bitcoin, Ether, and others are now available globally, significantly lowering the entry barrier for non-technical investors. Even pension funds like the State of Michigan Retirement System have started investing in Bitcoin thanks to these ETFs.
“We will also see more state buyers,” says Rashwan. Trump has promised to retain Bitcoins seized by the USA. Bhutan and El Salvador already hold official currency reserves. Various actors like Russia are interested in an alternative financial system and are likely to follow suit rapidly. “So, it’s not a question of if, but when states will hold Bitcoin – just as they already invest in stocks today.”
The head of a Zurich family office reveals that since last fall, his office has been allocating a small sum to Bitcoin and half a dozen other cryptocurrencies to gain experience. He believes that other investment vehicles of wealthy families are also considering an investment in Bitcoin at the moment.
There are Fewer Bitcoins than Ultra-High Net Worth Individuals
The investment professional, who wishes to remain anonymous, points to a study by consulting firm Capgemini, which states that there are 22.8 million people worldwide with investable assets of at least $1 million.
This means that not even every ultra-high net worth individual in the world could own a Bitcoin. If then there are speculative price predictions of $1 million or more, it could become a self-fulfilling prophecy.
Yes, the new Bitcoin-friendly government acts as a catalyst, writes one of these prophets on the social media platform X. His name is Jesse Myers, a fund manager who has put forward a Bitcoin forecast of $10 million. “But that’s not the main story here.”
Following the recent halving of newly mined Bitcoins, there is a supply shock. “The price equilibrium between supply and demand needs to be restored. The only way to achieve this is through a higher price, leading to a mania and a bubble,” says Myers.
Strictly speaking, the supply-demand balance cannot be disrupted, as a Bitcoin can be divided into almost any number of subunits, clarifies Hany Rashwan. “However, most investors will soon find it impossible to own a whole Bitcoin,” he says. Later on, not everyone will be able to afford half or a quarter of a Bitcoin either.