Bitcoin (BTC +1.14%) is the world's largest cryptocurrency. Its market capitalization of $1.8 trillion represents more than half the value of all cryptocurrencies in circulation, which currently stands at $3.4 trillion.
Bitcoin soared by 120% during 2024, and a significant portion of that gain was generated after Donald Trump's U.S. election win on Nov. 5. The President-elect campaigned on a pro-crypto agenda, so his incoming administration could deliver a set of policies that support a new wave of value creation across the industry.
So, should investors buy Bitcoin before Trump officially takes office on Jan. 20?
Image source: Getty Images.
Trump is likely to be a very pro-crypto President
The Securities and Exchange Commission (SEC) is responsible for regulating cryptocurrencies that might fit the definition of financial securities. Its chair for the last four years, Gary Gensler, is a very vocal critic of the industry. Even though the agency approved dozens of spot Bitcoin exchange-traded funds (ETFs) during his tenure, it only did so after losing a court challenge from one of the major issuers.
Gensler has announced that he will step down on Jan. 20. Resignation from that position is customary when a new administration is taking office. Trump has already nominated Paul Atkins to take his place, pending Senate approval. Atkins currently serves as the co-chair of a crypto advocacy organization called the Token Alliance, so there is no doubt about where he stands on digital assets.
But the Trump administration might be particularly good for Bitcoin, specifically. The incoming President has thrown his support behind radical ideas like establishing a strategic Bitcoin reserve, which could involve the U.S. government actively buying the cryptocurrency on the open market. That would almost certainly be a bullish catalyst.
The government already holds around $18.6 billion worth of Bitcoin that it seized from criminals and bad actors, so that might be a starting point for Trump's strategic reserve. But it's unclear whether he can actually kick-start this initiative on his own, or whether he will need the support of Congress, which would make things a little more complicated.
Bitcoin has several other things going for it, too
So far, no cryptocurrencies have proven their worth as mediums of exchange. Even as the industry leader, Bitcoin is only accepted as payment for goods and services by 7,928 merchants worldwide. Many of them are obscure providers of internet services, crypto services, and even online gambling houses.
It's very difficult for a currency to maintain value over the long term without widespread adoption from consumers and businesses. In Bitcoin's case, investors are buying it because they feel it's a great store of value instead -- kind of like a digital version of gold.
It's completely decentralized, so it isn't controlled by any person, government, or company. Plus, it operates on a secure system of record called the blockchain, and it has a fixed supply of 21 million coins which won't be fully "mined" until the year 2140. Those attributes make Bitcoin a very attractive place to park money compared to an asset like physical gold, which isn't very practical to buy, store, or sell.
Cathie Wood's Ark Investment Management thinks a price of $1.5 million per Bitcoin could be in the cards by 2030, based on eight potential factors. Recognition as digital gold is one of them, and so is institutional adoption. Bitcoin ETFs make it incredibly easy for institutional investors to invest in the cryptocurrency in a safe, regulated manner.
Ark also predicts that a growing number of businesses and governments will store Bitcoin on their balance sheets in the future, which fits with Trump's desire for a strategic reserve.
CRYPTO: BTC
Key Data Points
Should you buy Bitcoin before Jan. 20?
Bitcoin itself didn't face any regulatory headaches from the SEC over the last four years, despite the agency's hostility toward the industry overall. Since there is no person or company standing behind Bitcoin (or issuing more supply), it doesn't fit the definition of a financial security. Besides, there is nobody for regulators to sue.
My point is, Bitcoin probably won't benefit much from a friendlier SEC. However, the establishment of a Bitcoin reserve within the U.S. government would almost certainly drive up its value. An official announcement alone would likely send investors into a speculative frenzy, because it would be a clear endorsement from the world's most powerful country, which adds legitimacy to the cryptocurrency.
Therefore, there are ways the Trump administration could create real value for Bitcoin. But remember, it's still a speculative asset that investors buy in the hope someone will pay a higher price for it in the future. It has no actual utility in the real world to support its value over the long term, so there's no way to predict where its price might be in a few years.
Buying some Bitcoin before Jan. 20 isn't a bad idea. Just don't bet the farm. A position that represents 1% or 2% of the total value of your overall investment portfolio might be the way to go.
