The price of Bitcoin has been one of the most-asked questions of Amazon’s virtual assistant, Alexa, in the UK over the past 12 months as the value of the cryptocurrency continues to soar.
According to figures from the tech giant, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024.
The findings come as Bitcoin hit $100,000 for the first time earlier this month, with the cryptocurrency having benefitted from a “Trump bump” in the wake of Donald Trump‘s US election win.
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It is a milestone for the asset class, which has been propelled into mainstream conversation in recent years. But investors should remember that Bitcoin is a highly speculative and unregulated investment – meaning it is not suitable for all investors and should only ever form a small portion of a broadly-diversified portfolio.
“During the election campaign, Donald Trump promised to make the US ‘the crypto capital of the planet’, build a strategic reserve of Bitcoin if he returned to the White House, and he also set up his own crypto venture,” says Dan Coatsworth, an analyst at investment platform AJ Bell.
“Traders and investors took this to represent the ultimate endorsement of crypto and piled into Bitcoin as soon as the election result was called.”
What drives the Bitcoin price?
The election result is a perfect example of the sort of environment that drives the Bitcoin price – bullish sentiment.
While sentiment is a driver of all asset classes, investments like stocks and bonds also have market fundamentals that analysts can examine in an attempt to get a better understanding of their ‘true value’.
Each time Apple announces its quarterly earnings, for example, investors can look at its revenue, profit, capital expenditure, cash flow, and more. They can assess the potential impact of any new product releases on the outlook for the share price going forward.
Some stocks also pay a regular dividend. This can help compensate investors when share price growth is not strong, or soften the blow of losses.
Meanwhile, there are very few market fundamentals behind the Bitcoin price other than supply and demand. Bitcoin does not have any earnings and it does not pay an income, meaning its value is almost entirely driven by sentiment.
This means cryptocurrencies are highly volatile and large swings in the Bitcoin price can result in devastating losses. If you want to ride the hype, this is a prospect you need to be comfortable with.
What is next for the price of Bitcoin?
So, will the Bitcoin price rise higher? The answer is anyone’s guess, but some analysts say sentiment remains strong.
“US-listed business intelligence group MicroStrategy raised more than $7 billion through issuing shares and convertible bonds, and plans to use the proceeds to buy more Bitcoin on top of the 279,420 units it already owns (worth $28.4 billion),” says Coatsworth.
“That sent a big signal to the market that MicroStrategy remains bullish on the cryptocurrency even after the recent price rise, and investors raced to load up ahead of the company’s signalled buying spree.”
On top of this, investors expect Trump’s second term to bring a more relaxed regulatory environment, which could prove supportive for the Bitcoin price.
In a recent move, Trump nominated crypto-friendly Paul Atkins to be the next chair of the US Securities and Exchange Commission (SEC), writing on his social media site Truth Social that Atkins “recognises that digital assets and other innovations are crucial to Making America Greater than Ever Before”.
How to buy Bitcoin
Firstly, it must be stated that Crypto is not suitable for beginners or those who are unwilling to accept large losses.
But if you do want to proceed, then perhaps the easiest and most common method of buying Bitcoin is via one of any number of the popular cryptocurrency exchange sites, such as Gemini, Kraken or Crypto.com.
Once you have chosen your exchange, you then simply sign up, top up your account using one of the methods they have available, such as via debit card, and transfer your balance into Bitcoin.
You can then buy and sell Bitcoin on the exchange, or remove it from the exchange by downloading a digital wallet on your phone or other device.
If you prefer some sort of listed option, then you could buy Microstrategy (Nasdaq: MSTR), which has become something of a proxy for Bitcoin, and there is also London-listed bitcoin miner Argo Blockchain (LSE: ARB). Perhaps easiest of all is the Vaneck Vectors Digital Assets ETF (LSE:DAGB), through which you are gaining exposure to a basket of all the listed bitcoin companies. It is not the same as owning Bitcoin, but it is a start.