If investing is like gambling, bitcoin investors must feel like they’ve hit the jackpot.
The world’s highest-profile cryptocurrency has taken off like a rocket in the wake of Donald Trump’s victory over Kamala Harris, rising almost 10 per cent in 24 hours. As of mid-afternoon Wednesday, it was at a record high of $75,684.93 (U.S.)
Whether it’s the national bitcoin reserve floated by Trump during the campaign, the presence of cryptocurrency enthusiast and multibillionaire Elon Musk in Trump’s inner circle, or a lighter regulatory environment, there are no shortage of reasons for the bitcoin bump.
For true bitcoin believers like Edmonton’s Adam O’Brien, the sky’s the limit.
“I wouldn’t be surprised to see a seven-figure bitcoin inside of the 47th president’s term,” said O’Brien, CEO of Bitcoin Well, a crypto services company which began as a series of bitcoin-based ATMs. Yes, that means a million-dollar bitcoin over the next four years.
O’Brien says Trump’s suggestion during the campaign that he’ll be creating a strategic reserve of bitcoin for the U.S. government is a major catalyst for the rise, and his optimism. So too is the inclusion of Robert F. Kennedy Jr. in Trump’s list of potential cabinet choices.
“He’s going to help on the health side, but I was blown away with RFK’s knowledge of bitcoin when he spoke,” said O’Brien. “Having someone who understands bitcoin that well will help … position Trump’s administration into truly looking at bitcoin as a reserve asset, not as a speculative asset.”
There’s another more prosaic reason for bitcoin’s rise, argued Matthew Burgoyne, a partner at Osler Hoskin & Harcourt LLP: More crypto-friendly regulations.
“I really think it’s more about the potential regulatory changes. I don’t put much stock in the idea of a bitcoin reserve as what’s been moving it,” said Burgoyne, co-chair of the law firm’s digital asset practice.
Among the changes Trump is expected to make is replacing Gary Gensler as chair of the U.S. Securities and Exchange Commission, Burgoyne said.
“Until now, they’ve basically been taking an enforcement approach to regulation,” said Burgoyne. “A lot of crypto companies have left the U.S. because they haven’t had any regulatory certainty.”
Some cryptocurrency investors and companies have also spent tens of millions of dollars on so-called Super PACs lobbying for less restrictive regulatory environment, Burgoyne noted.
Still, Burgoyne cautioned that it might be too late to cash in on the current bitcoin bump.
“The problem with buying it now is that it’s already at an all-time high,” said Burgoyne. “The risk when you’re buying it in a bull run like this is that it’s going to level off and correct.”
There’s still some room for it to rise, Burgoyne said.
“I’ve been through a dozen of these bull runs. It’ll probably go into the 80s, maybe 90s, then it will drop back to the 70s,” said Burgoyne. “But we’re probably going to be in the high 70s for the foreseeable future.”
Despite the enthusiasm, bitcoin is still a highly-speculative investment, warned Saurin Patel, an associate professor of finance at Western University’s Ivey School of Business.
“It’s like going to a casino,” said Patel of the level of risk involved.
If people are dead-set on investing in cryptocurrency, including bitcoin, Patel suggests limiting it to a small chunk of their investment portfolio.
“If you want to take 10 or 15 per cent of your portfolio and put it into speculative investments, go ahead. But I wouldn’t put more than that. Put that 10 or 15 per cent into your gambling pot, but be prepared to lose it,” said Patel.
Still, argued O’Brien, the volatility is part of the point of bitcoin.
“When you have something that’s that liquid 24/7, 365, it responds when war starts. It responds when different leaders in different jurisdictions get elected. It responds when catastrophe strikes,” said O’Brien. “That’s a good thing. It’s a feature, not a bug.”
That volatility, he acknowledged, means that bitcoin isn’t the right choice for everyone, or every moment.
“People need to look at bitcoin in the macro, as a savings tool, as an asset they can store for generations. But if you need money in six months, and you’re reliant on the capital, Bitcoin’s a tough place to keep short-term value.”
