Bitcoin is Soaring: A Nonsense-Free Rally of 138%
Bitcoin has returned to center stage. Since Donald Trump’s election victory on November 5th, the world’s leading cryptocurrency has surged to unprecedented heights, surpassing $100,000 per unit. This marks an extraordinary 138% increase since the beginning of the year. Altogether, the cryptocurrency market now boasts a staggering $4 trillion in market capitalization—making it more valuable than the entire British stock market.
For holders of digital assets, the current momentum is undeniably thrilling. The political climate under Trump’s administration is adding fuel to the fire. Notably, Paul Atkins, a lawyer and prominent crypto advocate, has been nominated to head the Securities and Exchange Commission (SEC), America’s top financial regulator. The administration’s close ties to Silicon Valley, where influential figures have long argued that regulation has stifled the crypto sector, further bolster this narrative. Even seemingly outlandish proposals, such as Republican Senator Cynthia Lummis’s idea for a government reserve holding 1 million bitcoin, feel closer to reality than ever before.
This rally, however, diverges significantly from the speculative frenzies of 2017 and 2021. Those booms were driven by lofty visions of cryptocurrencies revolutionizing finance, promising a future where decentralized technology displaced traditional institutions. Today’s surge is less about idealistic dreams and more about pragmatic investment strategies. Bitcoin, in particular, has captured the attention of large institutional investors, reshaping the market’s behavior. The early crypto enthusiasm rooted in utopian ideals is giving way to a more calculated, profit-driven approach.
Hedge funds are leading this new wave of interest. Even before Bitcoin’s most recent surge, BlackRock’s Bitcoin exchange-traded fund (ETF) had already become the fourth-largest ETF among hedge funds, with a long position worth $3.8 billion by the third quarter of the year. A survey conducted by PwC and the Alternative Investment Management Association revealed that 47% of traditional hedge funds are now investing in digital assets, a sharp increase from 21% in 2021.
In contrast, excitement around decentralized finance (DeFi) and Web3—key themes during previous crypto rallies—has significantly cooled. Startups in these sectors raised only $7 billion this year, according to Crunchbase, consistent with last year but far below the $34 billion raised in 2021. Similarly, the VanEck Digital Transformation ETF, which invests in crypto-related firms, has dropped more than 40% from its 2021 peak. Non-fungible tokens (NFTs), such as those issued by CryptoPunks on the Ethereum blockchain, have seen a modest 20% increase in their floor prices this year. However, this pales in comparison to their nearly 70% decline from the highs of 2021.
What sets this rally apart is its simplicity. This is not a movement driven by idealistic visions or experimental blockchain applications but rather by straightforward speculation. For Bitcoin’s new wave of investors, the primary concern is whether the price will continue to climb. Bitcoin remains a highly volatile asset, thriving during brief periods of increased risk appetite—exactly what its institutional backers are banking on. Unlike the crypto pioneers who were driven by idealistic goals, today’s hedge fund managers prioritizing triple-digit returns on Bitcoin have little interest in the technology’s transformative potential.
This shift isn’t merely aesthetic—it’s altering the fundamental dynamics of the crypto market. Research from Alexander Copestake and Davide Furceri of the International Monetary Fund (IMF) and Tammaro Terracciano of IESE Business School indicates that Bitcoin is increasingly tied to broader financial markets. Institutional investors, who often hold diverse portfolios, are creating a tighter link between crypto and other risky asset classes. Consequently, the cryptocurrency market has become more sensitive to Federal Reserve monetary policies and fluctuations in stock market risk appetite.
The traditional crypto ethos of “HODLing”—a term for holding onto assets regardless of market conditions—doesn’t align with the strategies of institutional investors. These players are more likely to sell to secure profits or mitigate losses in other parts of their portfolios.
Looking ahead, if the regulatory environment becomes more favorable, institutional adoption of cryptocurrencies is likely to accelerate, with Bitcoin leading the charge. This would further integrate the cryptocurrency market into mainstream financial systems. While this institutionalization might propel Bitcoin and other cryptocurrencies to new heights, it could also alienate crypto’s most fervent believers. The rise of Bitcoin, fueled by Wall Street, represents a stark departure from its original purpose as a tool to disrupt traditional finance.
For the purists, the irony is palpable. Bitcoin’s current rally is driven not by its revolutionary potential but by its growing assimilation into the financial mainstream. Instead of upending the old order, cryptocurrencies are increasingly becoming part of it. Yet, for now, those invested in the rally can take solace in one undeniable fact: the profits are enormous.
