Digital currency Bitcoin achieves a new peak. Learn the factors behind its unprecedented rise.
Surge in Bitcoin Price Breaks Record at Over $110,000, Setting New High on Thursday
In a noteworthy development, the value of Bitcoin soared to a record-shattering high of $111,385 on Thursday, marking a notable increase of over 3%. This milestone marks the first time that the cryptocurrency has crossed the $110,000 mark.
The ascent in the price of Bitcoin has been observed since the November 2020 election of President Donald Trump, a known supporter and investor of crypto. Meanwhile, Ether, the second-largest cryptocurrency, also saw a 6% jump, while the $TRUMP memecoin, launched by the president in January, registered a nearly 6% growth.
The surge in cryptocurrency values follows a Senate vote on the GENIUS Act, an industry-backed bill designed to regulate some digital currencies. If enacted, the measure would establish rules targeting stablecoins, a type of cryptocurrency pegged to the value of another asset, often the U.S. dollar. Such regulation could potentially turn crypto into a mainstream tool for digital payments and other financial instruments, potentially attracting significant investment in digital currency.
However, critics have voiced concerns, arguing that the measure fails to address conflict-of-interest issues and may put consumers and the wider economy at risk with insufficient restrictions.
The record high for Bitcoin also coincides with a spike in Treasury yields amid deficit concerns linked to a domestic policy bill recently passed by the U.S. House. The nonpartisan Congressional Budget Office on Tuesday found that the tax policies backed by Trump would add $3.8 trillion to the national debt. This announcement comes days after a U.S. credit downgrade at Moody's due, in part, to the country's deficit. Higher yields increase the cost of U.S. borrowing and strain the nation's finances, potentially driving investors to seek alternatives to the U.S. dollar as debt yields face upward pressure.
Bryan Armour, the director of passive strategies research at financial firm Morningstar, attributes the recent rise in the price of Bitcoin to a combination of regulatory adoption and fear for the dollar given the expected high government spending. The price of Bitcoin has risen about 40% since the presidential election, with the S&P 500 declining 2%, while the tech-heavy Nasdaq has dropped 3%.
On another note, Trump previously expressed ambitions to make the U.S. the "crypto capital of the planet" in July 2021. He also promised to weaken federal oversight of cryptocurrency and establish the federal government's first strategic bitcoin reserve. In March 2021, he signed an executive order establishing a digital currency reserve, aiming to position the U.S. "as a leader among nations in government digital asset strategy." On Thursday, Trump is set to attend a gala with hundreds of top investors in his memecoin, a move that has raised concerns among some critics who argue it could be a means of exchanging access to the president for financial gain.
The GENIUS Act, with bipartisan support, seeks to establish a comprehensive federal regulatory framework for stablecoins, a major category of cryptocurrencies. The bill targets stablecoin issuers and platforms, setting clear rules for reserve requirements, transparency, and compliance with banking and security laws, as well as consumer protection and national security measures. Key provisions include full reserve backing, monthly public disclosures, annual financial audits for large issuers, marketing restrictions, AML/KYC compliance, transaction monitoring, and the ability to freeze or burn tokens in response to regulatory or security concerns. Non-compliant foreign issuers could be barred from U.S. markets. The bill aims to bring stablecoins into mainstream use for digital payments and financial instruments, fostering greater confidence in their stability and security. While it faces further legislative steps before potential enactment, it is seen as a step toward federal regulation of stablecoins with implications for market structure, consumer protection, and national security.
- The surge in Bitcoin's price, reaching $111,385, might attract investors from the general-news sphere, as they seek alternatives to the US dollar due to the increasing national debt and Treasury yields.
- In the realm of politics, the recently passed domestic policy bill in the US House has raised concerns about deficits, with the nonpartisan Congressional Budget Office predicting an additional $3.8 trillion to the national debt.
- The GENIUS Act, a bipartisan bill aiming to regulate stablecoins, encompasses various aspects of finance and business, including reserve requirements, transparency, compliance, consumer protection, and national security measures.
