Bitcoin’s golden year: From ETF approval to Donald Trump’s win

January 10, 2024, is a date that investors and businesses will mark on their calendars. It was the day the crypto world received Wall Street’s blessing and the approval of the Securities and Exchange Commission (SEC) for bitcoin exchange-traded funds (ETFs), kicking off a golden year for the most popular cryptocurrency. Bitcoin surpassed all expectations, buoyed by an influx of new investors and Donald Trump’s victory, which sent its price soaring to unprecedented levels, breaking through the psychological barrier of $100,000. The halving event (a change in the distribution mechanics of new bitcoins), along with a favorable macroeconomic environment and interest rate cuts by major central banks, further fueled its rise, making 2024 one of bitcoin’s most remarkable years since its creation in 2009.

The approval of bitcoin ETFs, after a long journey that began with the rejection of initial applications by the regulator in 2013, marked the official entry of cryptoassets into traditional finance. This milestone, which opened the door to broader access for investors and institutions alike, was initially met with little market reaction, as the price barely moved. However, nearly 12 months later, it is widely regarded as a turning point in the crypto ecosystem. The entry of major fund managers such as BlackRock, Fidelity, and Grayscale (the backers of bitcoin ETFs) has been crucial in driving the acceptance and adoption of crypto assets among both retail and institutional investors. In less than a year, these ETFs have become the most successful in history, surpassing $100 billion in total assets — compared to $285 billion for gold ETFs over their entire history.

Javier Molina, an analyst at eToro, believes that while the approval of bitcoin ETFs was a significant milestone, it must be viewed in a broader context. The launch of ETFs alone wasn’t enough; it was also the creation of the financial infrastructure that allows bitcoin to be considered a legitimate asset class, he explains. “It’s not the same to launch just ETFs as it is to create an options market for them, like the options on the iShares Bitcoin Trust ETF [IBIT, approved in November], managed by BlackRock. This addition attracts new investors and establishes the entire trading infrastructure,” explains Molina. This fund, currently the most successful on the market, manages over $55 billion in assets. The options market not only provides liquidity but also gives investors advanced financial tools to manage risk and speculate on price movements.

In April, the halving event — a process that occurs every four years, reducing the reward for mining bitcoins and slowing the rate at which new units are introduced into the network — reduced the cryptocurrency’s supply. Historically, halving events have been followed by sharp price increases, though the effects tend to be gradual rather than immediate. “Looking at the halvings in 2016 and 2020, bitcoin rose on average by 750% in the 12 months before and after the event, while this time it has risen by 200%,” says Manuel Pinto, a market analyst. This suggests that the cryptocurrency still has a lot of room for growth in the coming months.

The year 2024 was also an opportunity for the industry to shake off the weight of the scandals that have plagued the sector for years. Among them, the collapse of FTX stands out. The firm, which had previously stepped in to rescue other failing entities, collapsed in 2022, shaking an industry already accused of opacity and plagued by frauds that saw millions of dollars vanish. Last October, nearly two years after that dark chapter, the company’s administrators announced that they would fully reimburse their clients’ funds after recovering between €12.3 and €15 billion in assets since the collapse.

While U.S. regulators have long been wary of the highly volatile and opaque sector, it’s undeniable that the FTX bankruptcy — considered one of the largest recent financial frauds in U.S. history — has had a lasting impact on regulatory attitudes. Under the leadership of Chairman Gary Gensler, the SEC has taken a hostile stance toward the industry, which in turn views him as a villain. However, 2024 also brought some positive news for the crypto world: the election of Donald Trump, the first “cryptocurrency president,” who is tipped to usher in a new “golden age” for the sector.

Throughout his campaign, the Republican candidate began courting the crypto market with promises that resonated deeply within the industry. The prospect of relaxed regulation has instilled confidence among investors, who have long called for clear rules to define the limits of their activity. However, it is Trump’s promise to establish a strategic bitcoin reserve that has excited investors the most, fueling speculation about greater institutional adoption and a potential surge in bitcoin prices in the future.

The groundwork for this shift has already been laid with the proposed Bitcoin Act of 2024, which has been submitted to the U.S. Senate. This bill calls for the U.S. Treasury and the Federal Reserve to purchase 200,000 bitcoins annually for five years, up to a total of one million units, which would be held for a minimum of 20 years. This would represent 5% of the total bitcoin supply of 21 million. Currently, the U.S. maintains strategic reserves of oil and gold. The proposal aims to position bitcoin as a hedge against the devaluation of the U.S. dollar to strengthen the country’s balance sheet and back future debt issuance.

However, critics caution that bitcoin’s extreme volatility and reliance on speculative expectations rather than tangible fundamentals raise concerns. Its lack of maturity and long-term validation — especially in crisis situations — casts doubt on its effectiveness as a store of value. The sector itself remains divided on the project, particularly after comments from Federal Reserve Chairman Jerome Powell. At the last Federal Open Market Committee (FOMC) meeting, Powell emphasized that the Federal Reserve Act prohibits the institution from owning bitcoin, and the Fed has no intention of changing this stance.

Despite the skepticism, the market remains euphoric, fueled by the announcement of countries such as Brazil and Russia planning to accumulate bitcoin in their reserves. However, these plans are not limited to national governments. Many companies have also accelerated their bitcoin purchases. MicroStrategy is an emblematic case, effectively pivoting its business model. With 440,000 bitcoins worth nearly $50 billion, it became the first bitcoin company to join the Nasdaq 100. Other companies, including Metaplanet in Japan, Marathon Mining in the U.S., Galaxy, and Tesla, are also adding bitcoin to their portfolios, while Amazon is expected to address the issue at its annual meeting in April. Microsoft, on the other hand, has ruled out the option for now, though it has not closed the door to reconsidering it in the future.

“And more movement is expected, particularly with the adjustment by the Financial Accounting Standards Board (FASB) in the United States, the body responsible for setting accounting standards. This adjustment will allow companies to hold bitcoin on their balance sheets in a more efficient way,” explains Javier Pastor, Director of Training at Bit2Me.

Recently, the FASB announced an update to its guidelines for recording and valuing cryptocurrencies in the financial statements of companies. Previously, firms holding digital assets faced challenges in valuing and recording these assets, often resulting in inconsistency and a lack of transparency in their financial statements. Under the new regulations, cryptocurrencies must now be recorded at their market value at the end of each accounting period. This change will provide a more realistic representation of their value, according to the exchange.

But beyond promises, Trump has also taken action, appointing figures who are close to and supportive of the crypto world. Notable appointments include Scott Bessent as Secretary of the Treasury, investor David Sacks as White House crypto czar, and Elon Musk as director of the Department of Government Efficiency.

However, the appointment of Paul Atkins, former SEC secretary and cryptocurrency advocate, as chairman of the SEC to replace Gary Gensler, who will leave his post on January 20, has been the final signal the markets were waiting for to push bitcoin to new heights and fulfill its long-awaited dream of surpassing $100,000 for the first time in history. With this momentum at the end of the year, bitcoin’s market capitalization surpassed $2 trillion, overtaking the silver market and Saudi Aramco, and now accounts for more than 55% of the entire crypto market.

The favorable macroeconomic backdrop and interest rate cuts by major central banks have played a crucial role in this surge. Bitcoin thrives in environments with low rates and expansionary monetary policies, which encourage investors to take on riskier ventures. Dovile Silenskyte, director of digital asset research at WisdomTree, adds another factor: inflation. “Persistent concerns about rising prices, coupled with accommodative monetary policy, reinforced bitcoin’s image as ‘digital gold.’ In addition, geopolitical tensions and currency devaluations in certain regions increased demand for bitcoin as a decentralized, borderless alternative to traditional financial systems,” she explains.

While some claim their predictions were accurate, others admit that the bitcoin boom in 2024 took them by surprise. Ruben Ayuso, co-manager of A&G Global Investors’ FIL Cryptocurrencies, argues that the institutional adoption of bitcoin has been sweeping. “Norwegian and Swiss central banks invest in bitcoin through several listed companies, both Morgan Stanley and Goldman Sachs already invest in bitcoin ETFs through several of their funds. And at the state level, pension plans in Michigan, Wisconsin, and New Jersey have also started investing in the digital currency,” he notes.

However, when it comes to exchange-traded funds, around 80% of the flows are coming from retail investors, while institutional involvement is still in its early stages, suggesting substantial growth potential in both adoption and price.

Molina emphasizes that this year, bitcoin has made enormous strides, and the adoption of bitcoin by companies and states — once unthinkable — has now become a reality. “This is the year we all realized that we have a new asset class in our midst and that we need to participate in it,” he says. The shift in mentality towards an asset that has always been scrutinized has been evident, as bitcoin has solidified its position as a long-term store of value and firmly established its controversial label as “digital gold.”

However, not everything that glitters is gold. The consolidation of bitcoin as an asset does not eliminate its extreme volatility, which has been a significant feature even in this golden year. The most popular cryptocurrency has proven that it has no fear of heights or fluctuations — something that investors would prefer to avoid. This was evident in the last few days following the Federal Reserve meeting: when Powell announced a slowdown in rate cuts for next year, bitcoin quickly dipped below $100,000, falling to around $92,000, 14% below its all-time highs from just a few weeks ago. The asset followed the broader stock markets, which also saw declines of between 2.5% and 3.5% in the U.S. after the meeting.

The developments in 2025 will depend on a variety of factors, including inflation, the macroeconomic landscape, and the movement of key benchmark indexes. “The Nasdaq shook, and we already saw where bitcoin went,” warns Molina. According to the expert, if stock markets have reached their ceiling, the same may be true for cryptocurrency. He also highlights another risk: global liquidity, which has already diminished. “When liquidity falls, there’s an outflow of risk assets. And it’s clear to me that the first asset investors will exit is bitcoin.” While no one is predicting a new “crypto winter” just yet, experts remind us that strong rallies often happen very quickly, while the most bearish moments tend to be slow and painful.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition