New York (AP) witnessed a remarkable event as Bitcoin reached a new milestone by topping $100,000 for the first time. This massive rally in the world's most popular cryptocurrency was largely driven by the election of Donald Trump and has continued to gain momentum.

Unraveling the Bitcoin Phenomenon and Its Implications

Back up. What is Cryptocurrency Again?

Cryptocurrency has been in existence for some time. In recent years, it has gained significant attention. In simple terms, it is digital money that operates through an online network without a central authority. Transactions are recorded using blockchain technology. Bitcoin is the largest and oldest cryptocurrency, but other assets like Ethereum, Tether, and Dogecoin have also become popular. While some investors view it as a digital alternative to traditional money, the majority of daily financial transactions still use fiat currencies. Bitcoin's price is highly volatile and depends on larger market conditions.

For example, just two years ago, Bitcoin dropped below $17,000 after the collapse of crypto exchange FTX. This shows the inherent instability of the cryptocurrency market.

Why is Bitcoin Soaring?

A significant portion of the recent surge is related to the outcome of the U.S. presidential election. Trump, who was initially a crypto skeptic, has now pledged to make the U.S. the "crypto capital of the planet" and create a "strategic reserve" of Bitcoin. His campaign accepted cryptocurrency donations and he actively engaged with the crypto community.

On Thursday morning, shortly after Bitcoin surpassed the $100,000 mark, Trump congratulated "BITCOINERS" on his social media platform. This move further fueled the rally, and some industry players believe he took credit for it.

The Risks Involved

History has shown that one can lose money in crypto just as quickly as they can make it. The long-term price behavior of Bitcoin is highly dependent on larger market conditions. Trading occurs 24/7.

During the COVID-19 pandemic, Bitcoin started at just over $5,000 and climbed to nearly $69,000 by November 2021 due to high demand for technology assets. However, it later crashed during a series of aggressive rate hikes by the Federal Reserve. The collapse of FTX in late 2022 also significantly undermined confidence in the crypto market.

Experts stress caution, especially for small-pocketed investors. Even with the coming Trump administration potentially bringing lighter regulation, there are still uncertainties. As Adam Morgan McCarthy, a research analyst at Kaiko, said, "Keep it simple. And don't take on more risk than you can afford to." There is no guaranteed way to predict the future of Bitcoin.

The Climate Impact

Assets like Bitcoin are produced through a process called "mining," which consumes a large amount of energy. Operations relying on pollutive sources have raised concerns over the years.

Recent research by the United Nations University and Earth's Future journal found that the carbon footprint of 2020-2021 Bitcoin mining across 76 nations was equivalent to the emissions from burning 84 billion pounds of coal or running 190 natural gas-fired power plants. The energy source used plays a crucial role in the environmental impact.

However, industry analysts have noted that the use of clean energy has increased in recent years, coinciding with the growing calls for climate protection.