Bitcoin prices have been rocketing in recent days, hitting $93,000 early on Thursday morning and then remaining above $90,000. Market analysts attribute the rapid rise in Bitcoin prices to a continued rate cut made by the US Federal Reserve in November, a number of pro-cryptocurrency measures promised by the Republican Party during the presidential campaign, and other factors. According to US media, Senator Cynthia Lummis, a Republican from Wyoming, plans to push a bill when the new Congress takes office next year to sell some of the Fed’s gold to create a strategic Bitcoin reserve.
However, Bitcoin prices are influenced by a variety of factors, including supply and demand patterns, the macroeconomy and market sentiment. The Republican Party promised during the election campaign to include Bitcoin in national reserves, to make the United States the “cryptocurrency capital” of the world, and to appoint regulators interested in digital assets, driving the increase in Bitcoin demand.
The stabilizing global economic growth trend, mitigated inflationary pressures and interest rate cuts made by major central banks across the world have also brought more liquidity to the market. In addition, the optimistic market sentiment is also driving the rise in Bitcoin prices.
Although the incoming US administration has shown interest in cryptocurrencies, Bitcoin’s inclusion into the US’ strategic reserve first needs to go through complex legislative procedures involving the coordination and balance of interests among multiple regulators. Opposition from traditional financial institutions, conservative lawmakers and interest groups skeptical of digital assets will also pose considerable obstacles. From the market perspective, frequent price fluctuations are an impediment to Bitcoin’s future as a national reserve asset. Also, the US’ cryptocurrency regulatory system is not sound, and a more complete legal framework needs to be established.
The earlier Donald Trump administration was unfriendly toward Bitcoin. With its newfound love for Bitcoin, the US hopes it can take a leading position in the field of digital currency, so as to retain its competitive edge in the global economy. Faced with the pressure of massive national debts, it also hopes to reduce the issuance of national debt through the appreciation of Bitcoin.
As many countries have embraced “de-dollarization” following the US’ abuse of the dollar’s status, its excessive currency issuance and serious overdrawing of the dollar credit, the change in attitude toward Bitcoin may be a new attempt by the US to address the dollar’s weakening international status.