Asia Tea Time - #82 ☕

Bitcoin price hits all-time record high

Author

Tim Phillips
November 23, 2024 • Estimated Reading Time: 6 minutes

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This week I talk Bitcoin’s insane rally and why we should always be scrutinising costs of financial products.

Macro in Asia

Bitcoin price hits all-time record high

Bitcoin hit a record high of US$99,000 earlier this week as a frenzy of optimism took hold on the election of Trump as President of the US for a second time.

A big part of his campaign focused on de-regulating the crypto industry and having a more pro-crypto chairman in charge of the country’s Securities and Exchange Commission (SEC). 

Why it’s happening

  • Trump is set to take office as President of the US for the second time in January 2025 and he’s turning out to be a BIG fan of crypto.

  • That’s getting investors excited as he’s promised some “big league” moves on the campaign trail. Things like how he’d fire Gary Gensler on day one – the anti-crypto Chairman of the SEC – and saying the US government would never sell any of its Bitcoin reserve.

  • Appointing various pro-crypto figures to his new administration, like Elon Musk as the Head of the newly-created Department Of Government Efficiency (DOGE), has obviously helped the sentiment for Bitcoin. 

Why it matters

  • The total value of all Bitcoin in circulation is now close to US$2 trillion and the price of the cryptocurrency is up by 130% so far in 2024.

  • There is serious FOMO gripping the market with the price of Bitcoin up around 45% since just before Trump got elected in early November – less than three weeks ago.

  • An incoming administration that is open to crypto could potentially usher in a “golden age” for cryptocurrencies, particularly Bitcoin.

What’s next?

  • Look to where the Bitcoin price heads from here and if there’s a “cool off” period after such hefty gains.

Tim’s Take

  • The biggest “Trump trade”, it turns out, has been the Bitcoin one. That’s been down to a massive post-election party for the crypto bros crowd.

What’s more interesting, though, is that the legitimisation of crypto – specifically Bitcoin – was already under way earlier this year. Trump’s election may have catapulted the biggest crypto into the headlines (as is Trump’s tendency for showmanship) but when we look back, Bitcoin’s bigger “moment” may well be at the beginning of 2024 when Bitcoin ETFs were launched in the US.

Ironically, these Bitcoin ETFs – launched by giants like BlackRock’s iShares and Fidelity – was done under the regime of Gary Gensler’s SEC. As for the short-term direction of Bitcoin’s price, that’s anyone’s guess.

In Asia, the region is a leader in terms of adoption, with 10 Asian countries in the top 30 globally in terms of ownership rates. Singapore is one of the world’s leaders with an adoption rate of 24.4%.

With many people touting Bitcoin as an “inflation hedge” and giving it the moniker of “digital gold”, it’s perhaps no coincidence that the price of gold is also hitting record highs recently.

  • While the “FOMO struggle is real”, it’s worth remembering that outlandish projections on the future price of certain assets are always made at the peak of hysteria. Certain analysts in the crypto space have been laying out their price roadmaps, with one saying it could reach US$1 million by 2026.

Tim’s Money Tip of the Week

When we are preparing to commit to a long-term financial product, we should remember that many of these so-called “savings plans” have long and arduous lock-in periods.

That means while you do save, it’s money that is locked up for potentially up to 10 years or longer. This lack of liquidity adds “insult to injury” in that you’re paying super high fees on these AND you can’t access the funds for a while.

Some of these plans can have severe penalties for withdrawing early (say 5-10% of the capital invested) and also impose hefty charges if you want to switch to different investment strategies.

Finally, we should always question the financial incentives of individuals who sell us financial products because – inevitably – they likely won’t be aligned with your best interests as a long-term clients.

Looking to understand how banks and investment houses charge fees will help us go a long way in getting the best deal for our money, just like we always want to get the best value if we get a haircut or buy a chicken rice.

Approach your financial products with the same fervour that you would approach any other part of your everyday cost decision-making. We will definitely be thanking ourselves for that in the future.

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