Bitcoin breaks $106,000 barrier amid reserve optimism
Bitcoin soared to a record high above $106,000 on Monday, driven by United States President-elect Donald Trump’s proposal to establish a US bitcoin strategic reserve similar to the nation’s strategic oil reserve, stoking the enthusiasm of crypto bulls.
Bitcoin, the world’s biggest and best known cryptocurrency, reached an unprecedented peak of $106,533, closing with a 3.2% increase at $104,462. The smaller crypto, ether, also gained traction, rising 1.5% to $3,965.
“We’re in blue sky territory here,” said Tony Sycamore, an analyst at IG. “The next figure the market will be looking for is $110,000. The pullback that a lot of people were waiting for just didn’t happen, because now we’ve got this news.”
The surge in investor sentiment was further bolstered by the recent inclusion of MicroStrategy into the tech-heavy Nasdaq 100 index, which is expected to attract additional inflows to the software firm-turned-bitcoin investor.
As market experts anticipate a more favourable regulatory environment under the incoming Trump administration, enthusiasm for cryptocurrencies continues to grow, with bitcoin’s value climbing an impressive 192% for the year.
“We’re gonna do something great with crypto because we don’t want China or anybody else — not just China but others are embracing it — and we want to be the head,” Trump told CNBC late last week.
When asked if he plans to build a crypto reserve similar to oil reserves, Trump said: “Yeah, I think so.”
Governments around the world held 2.2% of bitcoin’s total supply as of July, according to data provider CoinGecko, with the US possessing nearly 200,000 bitcoins valued at more than $20 billion at current levels.
China, UK, Bhutan and El Salvador are the other countries with significant amount of bitcoins, data site BitcoinTreasuries showed.
Other countries have also been considering cryptocurrency strategic reserves.
Russian President Vladimir Putin earlier this month said the current US administration was undermining the role of the US dollar as the reserve currency in the global economy by using it for political purposes, forcing many countries to turn to alternative assets, including cryptocurrencies.
“For example, bitcoin, who can prohibit it? No one,” said Putin.
There are skeptics though, with Federal Reserve Chair Jerome Powell likening bitcoin to gold earlier this month. Analysts also point out that any such move will take time to implement.
“I think we still need to be cautious on a BTC strategic reserve, and at least consider that this is not likely to happen anytime soon,” said Chris Weston, head of research at Pepperstone.
“Of course, any comment from Trump that offers an increased degree of hope that plans for a strategic reserve is evolving are an obvious a tailwind, but this would come with consequences which would need to be carefully considered and well telegraphed to market players.”
Crypto surge
Bitcoin has surged more than 50% since the November 5 election that saw Trump elected along with many other pro-crypto candidates. The total value of the cryptocurrency market has almost doubled over the year so far to hit a record over $3.8 trillion, according to CoinGecko.
Trump — who once labelled crypto a scam — embraced digital assets during his campaign, promising to make the US the “crypto capital of the planet.”
Trump this month named a White House czar for artificial intelligence and cryptocurrencies, former PayPal executive David Sacks, a close friend of Trump adviser and megadonor Elon Musk.
Trump also said he would nominate pro-crypto Washington attorney Paul Atkins to head the Securities and Exchange Commission.
On Friday, exchange operator Nasdaq said MicroStrategy will be added to the Nasdaq-100 Index, with the change coming into effect before the market opens on December 23.
MicroStrategy, an aggressive investor in the world’s largest crypto asset, has seen its shares soar more than six-fold this year, taking its market value to almost $94 billion. It is now the largest corporate holder of the cryptocurrency.
Pepperstone’s Weston said the market was “front running the idea that Michael Saylor (MicroStrategy CEO) will capitalise on the likely rally in the MicroStrategy share price, given the impending passive flows from its inclusion into the NAS100 – where he’ll presumably sell shares and purchase more bitcoin.”
