The Journal. - Bitcoin Hit $100k. What's Next?

Episode Date: December 11, 2024

Last week, the price of Bitcoin reached $100,000 per coin, an all-time-high as President-elect Donald Trump promises his administration will be crypto-friendly. WSJ’s Alexander Osipovich breaks down the outlook for cryptocurrency. Further Reading: -Bitcoin Hits $100,000, Lifted by Hopes of a Crypto-Friendly Washington  -Crypto Players Celebrate SEC Pick, Bitcoin Touches $100,000  Further Listening: -Inside the Trump Crypto Bromance  -Coinbase’s CEO on the Future of Crypto  Learn more about your ad choices. Visit megaphone.fm/adchoices

Our colleague Alexander Osipovich has covered Bitcoin for seven years, and he has a takeaway. Bitcoin is not for the faint of heart. It's very volatile and periodically it has these massive drawdowns where it loses much of its value. Bitcoin at $20,000. We got Bitcoin hitting a new all-time high. It topped $50,000 a coin. Bitcoin plunged by 22% to below $42,000. Some key cryptocurrencies like Bitcoin did rebound a bit today,

but that's only after months of steady, dramatic losses. So the price of Bitcoin near an all-time high. What's your favorite Bitcoin milestone? Well, I quite like the one that was in late 2017 when Bitcoin got nearly to $20,000. So I felt like that was the first time that Bitcoin really broke out into the broad public consciousness and grandma was buying Bitcoin. The ones since then have felt like a season recap or something to me. Okay, and if grandma bought Bitcoin at 20,000, how's grandma doing today? Grandma would have gotten about a five-fold return on her investment.

Because last week crypto hit a major milestone. What happened? Late in the evening on Wednesday, December 4th, Bitcoin traded above $100,000 for the first time. This was the culmination of a rally that began with the election of Donald Trump. Trump has lately styled himself as a pro-Bitcoin, pro-crypto candidate, promised to appoint people who are crypto-friendly, adopt crypto-friendly policies,

and the crypto market has responded to that. Welcome to The Journal, our show about money, business and power. I'm Kate Leinbach. It's Wednesday, December 11th. Coming up on the show, what Bitcoin's rally tells us about where crypto is headed next. With Uber Reserve, you can book your Uber ride in advance. 90 days in advance. Perfect for all you forward thinkers and planning gurus. Reserve your Uber ride up to 90 days in advance.

Uber Reserve. See Uber app for details. Just two years ago, the vibe in the crypto world was so bad that it was considered a crypto winter. At that time, cryptocurrencies were plunging, firms were filing for bankruptcy, and then the crypto exchange FTX imploded. That was a low point. Bitcoin fell to around $16,000 per coin then. Many people at that point left crypto for dead and didn't think it was gonna come back. What was the reputation of crypto at that point?

Cryptos reputation took a beating after the collapse of FTX. There was the reputation of crypto at that point? Crypto's reputation took a beating after the collapse of FTX. There was the sense that if somebody who was a fairly well-respected figure in crypto, like Sam Bankman Fried, turned out to be a crook, then, well, what did that say about the rest of the industry? And regulators, government officials took a very skeptical look at crypto, kind of wanted to hit the brakes on its development. And for a while, regulators were on the war path, bringing different crypto cases, trying to rein in this Wild West of an industry.

And if crypto is the Wild West, the sheriff has been the Securities and Exchange Commission. The SEC, which regulates stocks and bonds, has argued that the crypto industry should be regulated like traditional finance. And the SEC has filed lawsuits against some of the biggest players in crypto. Securities and Exchange Commission filing charges against Binance. The SEC is suing crypto trading platform Coinbase. And that is just the latest move and a crackdown it appears against crypto companies in general.

How did the crypto world respond to this? The leaders of the crypto industry were definitely very frustrated with the approach of the SEC. They argued that the laws that the SEC was using, these securities laws, were just outdated and not really relevant to the way cryptocurrencies worked. Some of them said that, well, we want to register, we want to be regulated, but these regulations just don't make sense for what we do. The crypto firms fought back in court, but they did something else too. They also turned their attention to political organizing and raising money for different candidates to try to get a more friendly regime in place in Washington.

Interesting. What did they do to do that? Well, there's a long tradition in America of spending a lot of money to elect candidates that are friendly to your industry. And the crypto industry picked up that playbook. It was a very big spending industry that essentially hadn't really existed before on the campaign finance front. In the 2024 election cycle, crypto firms spent big.

They funneled tens of millions of dollars into super PACs, backing pro crypto candidates and trying to get crypto-minded voters to the polls with ads like this. One advocacy group backed by Coinbase called Stand With Crypto gave candidates a rating from A to F based on their support for the crypto industry. As the crypto industry is like, they're like, okay, we need some allies in DC. What were they looking for? What are their aims? One of the major aims of the crypto industry was to get a new regulatory framework written

for crypto in the US. Essentially, the crypto industry is lobbied for new rules to be written by Congress that would essentially allow a sort of light, easy to use regulatory framework for crypto companies to offer their coins, offer trading in different digital coins and have it all be blessed by regulators. That is a big item on the crypto wish list. And this big election push worked. In the end, according to Stand With Crypto, nearly 300 pro crypto candidates were elected to Congress.

And some lawmakers, seen as hostile to the industry, were voted out. So going into this next administration, the crypto industry is in a pretty good spot. Yes, the crypto industry is definitely very excited about Donald Trump and the incoming administration. Coming up, what a Trump White House could mean for crypto. [♪ music playing, fades out. [♪ music ends. With Uber Reserve, good things come to those who plan ahead. Family vacay?

Reserve your ride as soon as you book your flights. To all the planners, now you can reserve your Uber ride up to 90 days in advance. See Uber app for details. When Trump won the election, the crypto world celebrated by driving up the crypto market. A cryptocurrency surge that's been gripping Wall Street since President-elect Trump won the election last week. We're talking about cryptocurrency. It's hitting record highs after the election. Bitcoin hit another record high yesterday. We're talking about cryptocurrency. It's hitting record highs after the election.

Bitcoin hit another record high yesterday. There was a lot of excitement among Bitcoin investors that Trump would be great for crypto, great for Bitcoin, and he's essentially friendly to the crypto industry. Trump has even said he'd have the government own a lot of crypto. One of his pledges has been to create a Bitcoin strategic reserve. The idea is essentially if the US government comes into possession of Bitcoin, for instance, through seizing Bitcoin and some kind of law enforcement action, it wouldn't sell those Bitcoins, instead it would hold them and kind of gradually amass this stockpile. It will be the policy of my administration,

United States of America, to keep 100% of all the Bitcoin the US government currently holds or acquires into the future. We'll keep 100%, I hope you do well, please. The name of this concept, the Strategic Bitcoin Reserve, sounds a lot like the Strategic Petroleum Reserve, which is a giant stash of crude oil that we have that's owned by the government. And if you apply that idea to Bitcoin, it becomes very bullish for the price of Bitcoin

because you essentially have a giant holder locking up some of the supply and buying it and not selling it. Another sign of Trump's support of crypto came last week when he announced his pick for the new head of the SEC, a former SEC commissioner named Paul Atkins. Paul Atkins is a Republican former regulator who generally has taken the view that the government should stay out of financial markets, be a kind of light touch regulator, not go too heavy on enforcement actions. Atkins has been running a consulting company, Potomac Global Partners, whose clients include crypto firms.

One of Potomac's clients was FTX. The general expectation of the industry is that a Paul Atkins led SEC will be less tough in terms of enforcement and might even drop some of the current lawsuits that are pending against crypto firms. Here's Atkins on a podcast last year talking about crypto regulation. The rules impede financial innovation. So that's one reason why the SEC should be there with its ear to the ground to figure out, okay, which way are things moving and let's try to accommodate activity that's not

criminal and enable markets to flourish because if it's... In his comments that he's made about crypto so far, he's taken the view that the existing SEC, under the leadership of Gary Gensler, went too far in terms of enforcement actions against crypto. He's argued that it would have made more sense to create some rules of the road for crypto and not just go and try to find a bunch of companies.

What was the market reaction to the announcement of Atkins as the chair of the SEC? The crypto market rallied after Atkins was announced as the head of the SEC. There were a few good things that happened for crypto that day besides Atkins. Jerome Powell, the chairman of the Federal Reserve, also made some comments about how he didn't see Bitcoin as a competitor to the US dollar. All that together, along with the general sentiment that's existed in the market since Trump won, pushed Bitcoin above $100,000 for the first time. What does all of this excitement say about crypto right now?

Well, people have certainly tried to write off crypto before. Several times it has crashed and lost much of its value, and people have written obituaries for Bitcoin. But then it's come roaring back. What seems to have happened with Bitcoin in particular, and I'm not talking about the many other cryptocurrencies out there, is that people have really seized on this idea that it is a form of digital gold.

One of the fundamental properties built into it is limited supply. There will never be more than 21 million bitcoins. Most of those are already in existence. And so if there's demand for it, that is just going to drive the price up, just basic laws of supply and demand. And at a time when we have lost trust in a lot of our institutions, people are worried about inflation, there's this idea that maybe it's nice to store value in Bitcoin much the same way that people might have bought gold bars before. Does Bitcoin hitting 100,000 mean it is no longer a sort of fringe thing and it's sort

of becoming more establishment than it used to be? Bitcoin has definitely become more mainstream over the years. I mean, 10 years ago, it was this weird niche thing that most people hadn't heard of, and the people who were into various online subcultures that most people didn't even know about. But over the years, what generally happened is that there have been signs of mainstream adoption. The fact that the President-elect of the United States is now talking positively about Bitcoin is another sign of mainstream adoption. And Bitcoin's rise to 100,000 has been a roller coaster, as we've mentioned.

Which direction do you think Bitcoin's going in from here? Bitcoin really could go either way. There are Bitcoin people who think it's going to hit 200,000 or 250,000. That said, its historical performance suggests that it tends to rally to these very high peaks and then crash dramatically. So it really could go either way. It's likely to continue being a roller coaster.

That's all for today, Wednesday, December 11th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Dave Michaels and Caitlin Ostroff. Thanks for listening. See you tomorrow.