Will a Second Trump Term Boost Bitcoin?

Bitcoin and related cryptocurrency stocks soared on Friday, continuing a strong rally that began earlier this week.

Bitcoin itself rose as much as 5.3% over the 24 hours through Thursday's market close, boosting a wide range of closely related investments in the process. The world's largest cryptocurrency started the day on Friday at $22,224, up from $21,116 at the previous session's final trade.

Bitcoin's gains come as President-elect Donald J. Trump prepares to issue several executive orders on cryptocurrency regulations, perhaps on the first day of his second term. That would be on Monday, Jan. 16.

It's unclear exactly what Trump might say in these orders, and lawmakers who don't agree with these terms can slow down or even block some of them. But cryptocurrency enthusiasts expect government-sponsored Bitcoin mining, the first steps toward a strategic Bitcoin reserve in federal coffers, and more.

So it's a somewhat speculative price surge, but it does include elements of official policymaking and the hope of a more robust regulatory framework around creating, owning, and trading cryptocurrencies in America. If Trump holds up his part of the deal on Monday, the price gains could continue next week.

That's all good news for Bitcoin itself, and for spot Bitcoin exchange-traded funds (ETFs) like the leading iShares option in my data table. Coinbase could benefit from rising interest in cryptocurrency trades. MARA is a leading Bitcoin miner; Canaan makes the specialized computer chips that power crypto-mining data centers. All of these bullish moves make perfect sense today.

Don't count your encrypted chickens before they hatch

At the same time, Trump's cryptocurrency orders may face congressional friction and courtroom challenges. Those are the checks and balances built into the American Constitution. And it's hard to say exactly how helpful the promised orders can be until the Office of the Federal Register accepts and publishes them.

In the meantime, it's probably best to expect no significant changes to the crypto industry next week. Instead, you can base your investment moves on knowable facts such as the four-year cycle of Bitcoin halvings, the investor-friendly introduction of spot Bitcoin ETFs a year ago, and the media attention Bitcoin and other cryptocurrencies are getting from Trump's statements and actions.

And don't forget that companies like Coinbase, MARA, and Canaan are operating normal businesses with strict financial reporting requirements. Their business fortunes depend very directly on Bitcoin's price chart, but check out their cash flows and balance sheets before starting a position.

As you can see in the table, Friday's quickest gainers are actually trailing behind Bitcoin (and its ETFs) from a 52-week perspective. This is a risky business. With great growth prospects come great risks, to misquote a phrase from Peter Parker's Uncle Ben.