Contemplating a Bitcoin Purchase Before January 20th?
Bitcoin, the world's largest cryptocurrency, currently holds a market cap of $1.8 trillion and represents over half of the $3.4 trillion cumulative value of all cryptocurrencies in circulation. Its value soared by 120% in 2024, with a significant portion of the gain attributable to Donald Trump's U.S. election victory on Nov. 5. Given his pro-crypto stance, some investors pondered whether they should buy Bitcoin before Trump's official office on Jan. 20.
A Pro-Crypto President
The incoming Trump administration might be beneficial for Bitcoin, considering his support for radical ideas like establishing a strategic Bitcoin reserve. The U.S. government already holds around $18.6 billion worth of Bitcoin seized from criminals and bad actors, suggesting a potential starting point for such a reserve. However, it remains unclear whether Trump can initiate this alone or requires Congress's approval, making the process a bit more complex.
Paul Atkins, a co-chair of a crypto advocacy organization called the Token Alliance, has been nominated to replace Gary Gensler as the SEC chair, who was known for his critical stance against the industry. Atkins' crypto-friendly leanings suggest a more favorable regulatory approach that could benefit Bitcoin and other cryptocurrencies.
Bitcoin's Attractiveness
Bitcoin's decentralized nature, secure blockchain-based system, and finite 21-million coin supply make it an appealing alternative to traditional assets like physical gold. Investors view Bitcoin as a digital gold, using its store-of-value properties to hedge against inflation.
The cryptocurrency is accepted as payment for goods and services by only 7,928 merchants worldwide. Nevertheless, its merits as a favorable hedging tool have attracted the interest of institutional investors, with Ark Investment Management predicting a potential $1.5 million price target for Bitcoin by 2030.
Investing in Bitcoin Before Jan. 20
The appointment of Atkins to the SEC chair and the potential establishment of a strategic Bitcoin reserve within the U.S. government could drive up its value. However, Bitcoin remains a speculative asset. Despite no legal challenges from the SEC over the past four years, the Trump administration may not create significant value growth for the cryptocurrency. As a market alternatie, it may not be wise to invest heavily in Bitcoin as it may not support its value in the long-term, as it still lacks actual utility in the real world.
In conclusion, while investing in Bitcoin before Jan. 20 may not necessarily yield big gains, a small allocation to the cryptocurrency (around 1-2% of your overall investment portfolio) could introduce potential rewards.
Given the potential support for Bitcoin from the pro-crypto President Trump and the nomination of Paul Atkins, a crypto-friendly SEC chair, some individuals may consider investing their money in Bitcoin before January 20. In the context of finance, this investment could serve as a speculative move with potential rewards, as the appointments could positively impact Bitcoin's value. However, it's crucial to remember that Bitcoin's volatility and lack of extensive real-world utility make it a riskier choice compared to traditional assets, suggesting a prudent approach with only a small percentage of one's portfolio allocated to this digital currency.