New York. Bitcoin reached new record highs, surpassing $99,000 for the first time as its value surged more than 40 percent in just two weeks. The cryptocurrency now stands on the brink of hitting $100,000, just two years after plummeting below $17,000 following the collapse of crypto exchange FTX. This dramatic rally is driven in part by hopes that the incoming Trump administration will adopt a more "crypto-friendly" regulatory stance.

Bitcoin was trading at $98,882 early Friday, according to CoinDesk.

As with all things in the volatile crypto world, the future is uncertain. While some remain optimistic, experts continue to warn about the risks involved in crypto investments.

What Is Cryptocurrency?

Cryptocurrency, digital money that operates online without central authority or government backing, has gained significant attention over the years. Transactions are recorded using blockchain technology. Bitcoin, the oldest and largest cryptocurrency, is joined by other popular assets like Ethereum, Tether, and Dogecoin. Despite its appeal as a "digital alternative" to traditional currency, cryptocurrency is known for its volatility and susceptibility to market fluctuations.

Why Is Bitcoin Surging?

Bitcoin's recent price surge is largely linked to the outcome of the US presidential election. The crypto industry has welcomed Trump's victory, hoping he will push through the regulatory changes they've long lobbied for. These reforms are expected to offer more legitimacy to crypto without excessive regulation. Trump, who once opposed cryptocurrency, has recently pledged to make the US "the crypto capital of the planet" and to create a "strategic reserve" of bitcoin. His campaign even accepted cryptocurrency donations.

The real impact of these promises, however, remains uncertain. "This is not necessarily a short-term story; it’s likely a much longer-term story," said Citi macro strategist David Glass.

Adam Morgan McCarthy, a research analyst at Kaiko, emphasized the industry's desire for clarity. The current regulatory approach has often been enforcement-based, and while this has helped eliminate bad actors, comprehensive legislation could address other gaps.

In the meantime, 2024 has already been a transformative year for crypto regulation, with January's approval of spot bitcoin ETFs marking a significant development. These ETFs have become a dominant factor in bitcoin's momentum, with record inflows following the election. Kaiko reports that bitcoin ETFs saw $6 billion in trade volume during the week of the election alone.

What Are the Risks?

Crypto investments can be highly lucrative, but they also carry substantial risks. Bitcoin's price can fluctuate rapidly, influenced by broader market conditions. For example, during the early stages of the COVID-19 pandemic, bitcoin's price fell to just over $5,000, then skyrocketed to nearly $69,000 by November 2021. However, the price later crashed following a series of Federal Reserve rate hikes, and the collapse of FTX in late 2022 severely undermined confidence in the market.

While the market has bounced back with the success of spot ETFs, experts urge caution, particularly for smaller investors. Lighter regulations under the Trump administration could reduce investor protections, adding further uncertainty to the landscape.

Bitcoin has set record highs for ten of the last 21 days, but experts warn of potential "corrections," where prices could drop again. "I would say, keep it simple and don't take on more risk than you can afford," McCarthy advises. "There isn’t a 'magic eight ball' to know for certain what comes next."

The Climate Impact

Bitcoin mining, a process that consumes large amounts of energy, has raised environmental concerns. Recent research by the United Nations University and Earth’s Future journal revealed that the carbon footprint of 2020-2021 bitcoin mining across 76 nations was equivalent to emissions from burning 84 billion pounds of coal or running 190 natural gas-fired power plants. The majority of bitcoin's electricity came from coal (45 percent), followed by natural gas (21 percent) and hydropower (16 percent).

The environmental impact of mining largely depends on the energy sources used. However, analysts have noted that clean energy adoption has increased, in response to rising calls for climate protection.

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