Bitcoin made history on Wednesday as its price surpassed $100,000 for the first time. This remarkable achievement came during a rally that was set in motion by the election of former President Donald Trump. Since Election Day, when voters chose a candidate seen as favorable towards digital currency, Bitcoin has witnessed an astonishing climb of more than 40%. Such gains have far outpaced the performance of the stock market. While the S&P 500 has increased by about 2.4% and the tech-heavy Nasdaq has jumped 2.6% over the same period, Bitcoin has soared to new heights.

Trump's Impact on the Cryptocurrency Sector

During his campaign, Trump pledged to support the cryptocurrency sector and ease regulations imposed by the Biden administration. He even promised to establish the federal government's first National Strategic Bitcoin Reserve. Additionally, Trump vowed to replace Securities and Exchange Commission Chair Gary Gensler, who is disliked by many crypto proponents for his approach to crypto regulation. Gensler announced his intention to resign on Jan. 20, 2025, which is the date of Trump's inauguration. This post-election euphoria has not only lifted Bitcoin but also other parts of the crypto sector. Ethereum, the second-largest cryptocurrency, has climbed 27%, while lesser-known dogecoin has skyrocketed about 140% and litecoin has surged 35%. Shares of Coinbase, a top crypto trading platform, have also increased more than 70% since Trump's reelection.

The History of the Crypto Industry

The crypto industry has had a remarkable turnabout in recent weeks. Entering this year, it was bruised after a series of high-profile collapses and company scandals. For example, FTX, a multibillion-dollar cryptocurrency exchange co-founded by Sam Bankman-Fried, collapsed in November 2022. This led to a 17-month legal saga that ended with Bankman-Fried being convicted of fraud and sentenced to 25 years in prison. Changpeng Zhao, the founder and former CEO of major cryptocurrency exchange Binance, was also sentenced to four months in prison in April after pleading guilty to charges related to enabling illicit financial activity. However, the reelection of Trump has marked a series of positive developments for the cryptocurrency industry.

The Role of Bitcoin ETFs

In January, the U.S. approved bitcoin ETFs, or exchange-traded funds, which have played a significant role in the recent surge of Bitcoin. Bitcoin ETFs allow investors to buy into an asset that tracks the price movement of Bitcoin without the inconvenience and risk of purchasing the crypto coin itself. Last month, options on BlackRock's popular iShares Bitcoin Trust ETF (IBIT) became available for trading on the Nasdaq. These options provide a new avenue for Bitcoin investors, allowing them to commit to buy or sell the ETF at a given price by a specific date. While such investments come with additional risk, they also offer the potential for large payouts. IBIT inched upward 1% on Friday and reached a record high of about $56.

Volatility and Future Prospects

Despite the recent surge, the performance of cryptocurrencies, including Bitcoin, remains volatile. Bryan Armour, the director of passive strategies research at financial firm Morningstar, attributed the recent crypto surge to investors' anticipation of friendly policy under Trump and the newly available options trading for Bitcoin ETFs. However, he also warned that the price of Bitcoin could fall, especially if Trump faces difficulties in fulfilling his campaign commitments. "As long as the narrative stays positive, there's always room to grow," Armour told ABC News before Bitcoin reached $100,000. "I also think campaign promises don't always come to fruition." He added that Bitcoin is still a highly volatile asset.