Friends in high places: Trump may help Bitcoin hit new highs

• Trump: We'll do something 'great' with crypto
• Bitcoin tops $100K for first time
• Analysts expect a friendlier D.C.

WASHINGTON - The crypto industry bet big on Donald Trump in the 2024 election – and it could well reap even bigger rewards next year.

Major cryptocurrencies such as Bitcoin have rallied toward new highs as Trump, more so than any other U.S. presidential candidate, made heavy overtures to the industry. 

The industry returned the favour, with crypto-aligned interests pouring huge sums of money into Trump-backed groups.

Will the Trump-inspired rally continue in 2025 and what awaits the industry policy-wise? 

Here's what to know: 

How have cryptocurrencies performed in 2024?

Bitcoin – which makes up most of the crypto market – has rallied more than 40% since the November election and even eclipsed $100,000 for the first time.

It had made steady gains throughout the year as prediction markets priced in a Trump win and crypto-supported groups duly poured money into Trump's campaign.

"We're going to do something great with crypto, because we don't want China or anybody else, and not just China, but others are embracing it, and we want to be the head," Trump said on CNBC as he helped open the New York Stock Exchange in December.  

How likely is a continued boom next year and beyond?

Despite a recent brief pullback for Bitcoin, analysts are forecasting the trend for strong prices will continue apace.

It is reasonable to expect Bitcoin to hit $200,000 by the end of 2025, according to a Standard Chartered Bank projection.

Bitcoin is "like gold that you can email," said Zack Shapiro with the Bitcoin Policy Institute, a nonprofit research group.     

"Bitcoin has all of those same traits as gold – in some cases it has those traits more strongly. It is more divisible, it is more transportable, it's more auditable," he said.

Bitcoin's market capitalisation is roughly $2 trillion, while gold's cap is roughly eight times bigger.

"I think already the tone that Trump and people around him have taken towards Bitcoin might be responsible for some of the rally we've had," Shapiro said.

What might come next on the policy front?

Trump has already enthralled crypto enthusiasts by picking Paul Atkins, who has strong industry ties, to head the Securities and Exchange Commission (SEC) and naming tech mogul David Sacks as his choice for cryptocurrency czar.

Outgoing SEC chair Gary Gensler and other U.S. agencies drew industry accusations of over-regulation – helping create a "chilling effect" among would-be investors and entrepreneurs, said Peter Van Valkenburgh with Coin Center, a nonprofit research and advocacy group.

"There is hope that some of that chilling effect will fall away," he said.

Lawmakers have pushed various pieces of legislation tied to crypto, including one from Republican Senator Cynthia Lummis of Wyoming that would establish a "Bitcoin reserve" and have the government acquire an approximate 5% stake in Bitcoin over time.

"Bitcoin is transforming not only our country but the world and becoming the first developed nation to use Bitcoin as a savings technology secures our position as a global leader in financial innovation," Lummis has said.    

How wary should investors be of a potential collapse? 

The prosecution of Sam Bankman-Fried and cryptocurrency exchange FTX's collapse in late 2022 laid bare some of the risks that novice investors can face in crypto markets.

Atkins himself suggested last year that the U.S. government could have been more proactive in preventing the FTX disaster.

"The collapse of FTX was this international debacle that happened because, I think, the U.S. didn't make our rules accommodating to this new technology," Atkins was quoted as saying in a podcast. 

Industry critics say cryptocurrencies are prone to massive scams and have also been used to launder money worldwide.

Van Valkenburgh suggested a balanced approach that could enable secondary markets to take off while simultaneously holding illicit actors to account.

"We might see over the next four years a much greater likelihood of some sort of federal regulatory standards for secondary markets," he said. 

"And so that would be, in one modest way, an increase in regulation if you will – but a very sensible one, hopefully, that would just put some common-sense guardrails in place."

(Reporting by David Sherfinski; Editing by Lyndsay Griffiths)