The Rise of Bitcoin: Trump’s Support Sparks Investor Interest
Bitcoin’s scarcity is already surpassing that of gold. With Donald Trump openly endorsing cryptocurrencies, new investors like pension funds and wealthy families are expected to jump on the bandwagon.
Donald Trump’s victory significantly boosted the price of Bitcoin. On election night alone, the price of the leading cryptocurrency surged by 10 percent, reaching over $93,000 in the following days – setting a new record once again.
A Matter of Faith
Key figures in Trump’s circle, from Vice President J. D. Vance and “Mr. Dogecoin” Elon Musk to designated Attorney General Matt Gaetz, are staunch supporters of cryptocurrencies.
It is noteworthy that just a few years ago, there were doubts about whether Bitcoin would prevail and achieve the status of “digital gold.” Like a religion, it only becomes a reality when a significant number of believers trust its message.
With a market value of nearly $1.8 trillion and increasing support from politics, banks, and even academia, Bitcoin is poised to at least match gold in the eyes of many experts.
More Gold is Mined Than Bitcoin
While the total market value of all gold reserves far exceeds that of Bitcoin, the latter is already scarcer than gold. This can be attributed to the ratio of the current available supply and production rate.
- Approximately 212,600 tons of gold exist, in various forms like jewelry, bars, and coins.
- Each year, about 3,600 tons of gold are mined and added to this supply.
- At the current production rate, the gold supply would double in 59 years.
In contrast, it would take 120 years to double the current supply of Bitcoin. Moreover, the production of new Bitcoin has decreased significantly, with only half as many new coins added since April. This trend will continue, leading to a limited total supply of 21 million Bitcoin.
At Least 2 Million Bitcoin are Lost
Additionally, the actual supply of Bitcoin is likely smaller than the reported 19.7 million coins due to an estimated 2 to 3 million coins being lost forever. This means that at least 10 percent of Bitcoin owners have misplaced their digital access keys, rendering their holdings inaccessible. In contrast, gold is rarely lost.
As Bitcoin’s acceptance grows, particularly among investment professionals, the equilibrium between supply and demand will be crucial. Institutional investors are showing increasing interest in crypto-assets, as indicated by a recent survey by Bank Sygnum, where 57 percent of 400 institutional investors expressed a desire to increase their crypto holdings.
Low Entry Barriers
Bitcoin has been predominantly purchased by retail investors, hedge funds, and family offices. However, many institutional investors, such as pension funds and insurance companies, are preparing to enter the market. This increased demand is expected to materialize next year.
With the availability of exchange-traded funds (ETFs) on Bitcoin, Ether, and other cryptocurrencies worldwide, the entry barriers for less tech-savvy investors have significantly decreased. Even pension funds, like the State of Michigan Retirement System, have started investing in Bitcoin thanks to these ETFs.
The future holds the potential for more state buyers, as countries like Bhutan and El Salvador already hold official currency reserves. Russia and other entities are also eyeing an alternative financial system, indicating a shift towards Bitcoin as a mainstream asset.
There are Fewer Bitcoins than Ultra-High Net Worth Individuals
According to a study by Capgemini, there are 22.8 million individuals worldwide with investable assets exceeding $1 million. This means that not every ultra-high net worth individual can own a Bitcoin. The proliferation of price forecasts exceeding $1 million could potentially lead to a self-fulfilling prophecy.
While the new Bitcoin-friendly government acts as a catalyst, the recent halving of newly mined coins has created a supply shock. This imbalance between supply and demand will necessitate a higher price to restore equilibrium, potentially leading to a speculative bubble.
Although Bitcoin can be subdivided into almost infinite units, most investors will soon find it challenging to own whole coins, leading to fractional ownership becoming the norm.
Conclusion
With Donald Trump’s endorsement of Bitcoin and the increasing interest from institutional investors and wealthy families, the cryptocurrency’s value and scarcity are becoming more evident. As the world transitions towards a digital economy, Bitcoin’s role as a store of value and a recognized asset class is solidifying, paving the way for a new era of financial innovation and investment.
FAQs
1. Is Bitcoin a safe investment?
While Bitcoin has shown significant growth and potential, it remains a volatile asset. Investors should conduct thorough research and consider their risk tolerance before investing in cryptocurrencies.
2. How can institutional investors access Bitcoin?
Institutional investors can access Bitcoin through various channels, including exchange-traded funds (ETFs), futures contracts, and direct purchases on cryptocurrency exchanges. These options provide institutional investors with diversified strategies to incorporate Bitcoin into their portfolios.
3. What is the future outlook for Bitcoin?
As Bitcoin gains mainstream acceptance and adoption, its value and scarcity will continue to drive its growth. Regulatory developments, technological advancements, and market trends will shape Bitcoin’s future trajectory, making it a compelling asset for investors seeking diversification and exposure to digital assets.