Bitcoin surges towards $100,000 as Donald Trump's election victory sends shockwaves through the markets

the price of bitcoin towards $100,000 (£79,900) is the most remarkable of the market reactions to Donald Trump's election victory.

Bitcoin's remarkable surge towards $100,000 (£79,900) is the most striking market reaction to Donald Trump's election victory.

The president-elect's pledge to create a White House centred on cryptocurrency and the promise to make computer-generated currencies more acceptable are among the factors pushing up the price.

Bitcoin, like gold, is seen by some investors as a way to get around the risk in dollar assets.

Geopolitical tensions are rising by the day, as evidenced by Russia firing a hypersonic intermediate-range ballistic missile into Ukraine.

It was the first use of such an advanced weapon, without a nuclear warhead, and was intended to demonstrate the Kremlin's readiness to escalate its response to the US and Britain allowing Kyiv to deploy longer-range rockets.

There are also economic reasons why billions of dollars of cash are flowing into alternative assets.

Trump's tax-cutting plans are likely to increase an already-large American budget deficit. The initial response has been to drive the dollar higher against the euro, sterling and other currencies.

But the size of America's debt pile - 123 per cent of output and rising - is a future concern. Even the world's reserve currency could blow up.

Gold hit an all-time high in recent trading, reaching £2160 per troy ounce when measured in pounds. The latest rise pushes gold past the previous record set in 1979 during the geopolitical crises following the Russian invasion of Afghanistan and the US-Iranian hostage crisis.

Bitcoin is also seen as a safe haven, but it is also being fuelled by upcoming changes on Wall Street.

The latest rally has been fuelled by the news that Gary Gensler will be stepping down as chairman of the Securities and Exchange Commission (SEC). Gensler, anticipating the sack, pointedly decided to leave at noon on inauguration day just as Trump is sworn in.

He has been a bulwark against the spread of bitcoin into mainstream finance, only approving exchange traded funds in crypto when ordered to do so by the courts. Crypto has moved to the heart of Wall Street.

It was during the first Trump administration that bitcoin futures and options contracts began trading in Chicago.

And in early 2024, exchange traded funds, which allow retail and professional investors to deal in complex assets, were approved. Blackrock and other asset managers now hold $85billion (£68billion) in digital currencies.

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Software tycoon Michael Saylor, who runs California-based Micro Strategy, is also helping to drive the remarkable rise in the price of bitcoin. The company has aggressively increased its exposure since Trump's election, purchasing $7billion of cryptocurrency.

It is funding its purchases through a heroic piece of fundraising. It has issued $4.6billion of new shares and a convertible bond.

There was so much demand that it was able to increase the size of the bond offering to $2.6billion.

One might think that investors would be unnerved by the splurge. But Micro Strategy shares have risen a further 15 per cent in recent days.

They have now increased by 900 per cent over the last year, valuing the firm at an astonishing $89billion (£71billion).

The group is now believed to be the world's largest corporate holder of bitcoin, with a total stake worth $31billion (£25billion).

It is a reminder of previous attempts by financiers to corner commodity/asset markets. In 1980 Texas oilman Nelson Bunker Hunt set out to acquire the silver market, buying the rights to $4.6billion (£3.6billion) of the precious metal.

But the US central bank, the Federal Reserve, stepped in and burst the bubble. Bunker Hunt's fortune was wiped out.

And an attempt by a trader at Japan's Sumitomo Bank in 1990 to corner the copper market ended in disaster and a fraud trial.

There is a world of difference between buying gold and other precious metals, and bitcoin. Traders in metals know there is something solid behind their purchase.

Bitcoin is mined by computers and no one really has a clue about how this new-fangled currency is created.

When the herd stampedes it is usually a good time to beat a retreat.

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