Bitcoin, the world's most prominent cryptocurrency, has achieved a significant milestone by blasting through the $100,000 threshold. This event has sparked intense speculation about its future trajectory and the potential for continued growth. However, its notorious volatility remains a concern, raising questions about its long-term stability.

Unraveling Bitcoin's $100K Journey and Volatility

Bitcoin's Initial Surge and Market Reaction

The world witnessed Bitcoin's remarkable rise to around $103,400 shortly after 04:00 GMT on Thursday. This surge captured the attention of investors worldwide and led to a flurry of activity in the cryptocurrency market. Dan Coatsworth, an investment analyst at AJ Bell, described it as a "magic moment" and emphasized its clear link to Donald Trump's election victory. Trump took to social media to celebrate this milestone, posting "congratulations Bitcoiners" and "you're welcome!" His previous pledge to make the US the "crypto capital" and "Bitcoin superpower" of the world played a significant role in pushing Bitcoin's price higher.After Trump said he would nominate former Securities and Exchange Commission (SEC) commissioner Paul Atkins to run the Wall Street regulator, Bitcoin broke through the $100k barrier. Mr. Atkins is regarded as being more pro-cryptocurrency than the current head, Gary Gensler. Andrew O'Neill, a digital assets expert at S&P Global, stated that there is anticipation that the new administration will be more favorable to crypto, which has likely driven the trend so far and is expected to continue into the new year.

Historical Volatility and Investor Caution

Bitcoin has a long history of sharp falls as well as rapid rises. This high-risk asset is not suitable for everyone, as highlighted by Mr. Coatsworth. It is volatile, unpredictable, and driven by speculation, which makes it a challenging investment option. During the US presidential election campaign, Trump aimed to appeal to cryptocurrency investors by promising to sack Gary Gensler on "day one" of his presidency. Mr. Gensler's approach to the cryptocurrency sector has been less friendly compared to Trump's. He told the BBC in September that the industry is "rife with fraud and hucksters and grifters." Under his leadership, the SEC brought a record 46 crypto-related enforcement actions against firms in 2023.However, Bitcoin's potential to suddenly plummet in value serves as a reminder that it is not like orthodox currencies. Investors have no protection or recourse if they lose money on Bitcoin investments. Carol Alexander, a professor of finance at Sussex University, believes that fear of missing out (FOMO) among younger people will continue to drive Bitcoin's price upward. But she also warns that many younger investors investing in meme coins are losing money.Kathleen Breitman, the co-founder of another cryptocurrency - Tezos - advises caution for those tempted to invest in Bitcoin. She emphasizes that these markets tend to move on momentum and require extraordinary caution.

Recent Factors Boosting Investor Confidence

In 2024, Bitcoin has seen fewer drastic falls in value compared to previous years. One of the key events that has helped boost investor confidence is the SEC's approval of several spot Bitcoin exchange traded funds (ETFs). This allows giant investment firms like Blackrock, Fidelity, and Grayscale to sell products based on the price of Bitcoin. Some of these products have witnessed billions of dollars in cash inflows.These developments indicate that Bitcoin is gaining more acceptance in the traditional financial world. While its potential for growth is promising, investors must remain vigilant due to its inherent volatility. The cryptocurrency market continues to evolve, and Bitcoin's future remains uncertain. However, its impact on the global financial landscape cannot be ignored.