NEW YORK, USA – Bitcoin, the world’s first and most recognised cryptocurrency, has shattered records in 2024, driven by groundbreaking regulatory developments and a shifting political landscape.
Following the Securities and Exchange Commission’s (SEC) approval of exchange-traded spot bitcoin funds earlier this year, the cryptocurrency surged past $70,000 in March, reaching $80,000 earlier this month.
On Monday, November 18, 2024 it soared to an unprecedented $90,000.
Bitcoin enthusiasts attribute the rapid ascent to Donald Trump’s recent presidential victory, which they anticipate will usher in a more crypto-friendly regulatory environment.
Many advocates, including prominent business leaders, have proposed creating a strategic Bitcoin reserve to position the United States as a global leader in cryptocurrency.
Michael Saylor, executive chairman of MicroStrategy and a staunch Bitcoin proponent, told CNBC, “Bitcoin represents the future. A strategic reserve would allow the U.S. to buy into that future.”
A Decade of Volatility and Growth
Since its creation in 2009 by the pseudonymous Satoshi Nakamoto, bitcoin has remained a polarising and volatile asset.
Its value is untethered to tangible goods or services, relying solely on market demand.
Despite its record highs, bitcoin has seen dramatic lows; between November 2021 and November 2022, it lost 75% of its value, plummeting from $64,455 to $16,196.
Financial advisers continue to express caution.
“Bitcoin is highly volatile,” said Trent Porter, a certified financial planner at Priority Financial Partners.
“It’s not for short-term savings or essential financial goals.”
Strategic Role in Investment Portfolios
Financial planners generally recommend limiting exposure to bitcoin, emphasising that it should never dominate an investment portfolio.
Experts suggest allocating no more than 3-5% to speculative assets like bitcoin, particularly for long-term goals such as retirement.
Mike Turi, a certified portfolio management adviser, advises against relying on bitcoin for achieving primary financial objectives.
“If you have extra investable money and can afford the risk, it might help you reach goals faster,” he said.
“But don’t overexpose yourself or neglect other opportunities.”
Matt Elliott, a financial planner at Pulse Financial Planning, recommends a “core and explore” approach: 95% of investments should remain in diversified, stable assets, while the remaining 5% can be allocated to speculative ventures like bitcoin.
New Avenues for Crypto Investment
The approval of spot bitcoin exchange-traded funds (ETFs) by the SEC has provided a safer and more accessible avenue for investors.
These funds allow individuals to gain exposure to bitcoin without directly holding the asset, which mitigates risks like losing private keys or falling victim to cyberattacks.
“ETFs are the safest option for most retail investors,” said Porter.
“They remove many of the complexities and risks associated with direct cryptocurrency ownership.”
As of last Friday, investors had poured nearly $28 billion into bitcoin ETFs, which collectively boasted a net asset value of nearly $96 billion, according to Morningstar Direct.
Considerations Before Investing
Experts urge potential investors to assess their risk tolerance and financial stability before buying bitcoin.
“Ask yourself: If bitcoin drops 50%, would it significantly impact your finances? If so, reconsider,” Porter said.
Additionally, Turi highlights the importance of setting clear parameters.
“The biggest mistake is entering at a peak without an exit strategy. Establish your exit price to avoid emotional decision-making.”
Broader Implications for the Crypto Industry
Bitcoin’s meteoric rise reflects increasing mainstream acceptance and significant changes in the regulatory landscape.
Trump’s administration is expected to take a favourable stance on cryptocurrency, further boosting market confidence.
However, experts warn that regulatory risks remain, and the inherent volatility of bitcoin persists.
For those venturing into the crypto market, diversification, careful planning, and a clear understanding of the risks remain paramount.
Bitcoin’s surge may offer lucrative opportunities, but financial professionals stress that it should only represent a small fraction of an overall investment strategy.
As the world of cryptocurrency continues to evolve, bitcoin’s unprecedented highs are likely to keep it in the spotlight, reinforcing its role as both a speculative investment and a symbol of financial innovation.
