Bitcoin was far and away the best-performing asset class in 2024 as new exchange-traded funds ushered in more widespread adoption and hopes for deregulation under a new presidential administration lifted digital assets to record levels.
But owning cryptocurrency also came with its usual unpredictability and dizzying swings, as this month's trading clearly illustrates. Bitcoin has more than doubled in price since starting the year in the $40,000 range, with it last trading near $94,000. Ether has scored a nearly 50% year-to-date gain, and last traded at around $3,355.
The most prosperous stretch of the year occurred in the weeks following the U.S. presidential election. By mid-December, the cryptocurrency had rocketed above $108,000 for the first time, fueled by optimism that President-elect Donald Trump's victory over Vice President Kamala Harris would open the door for greater regulatory clarity and send new money rushing into the sector.
Since then, however, prices have eased. Bitcoin is negative for the month, hurt by the expectation that the Federal Reserve's rate cuts will roll out at a slower-than-anticipated pace. The market has also faced a stretch of apparent profit-taking and choppiness into the end of the year.
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The year began with a strong boost of confidence from the introduction in January of new ETFs that hold the cryptocurrency. The funds, which are pitched by asset managers as a simpler way for investors to access bitcoin, have pulled in tens of billions of dollars of cash this year. The iShares Bitcoin Trust ETF (IBIT) now has more than $50 billion in assets.
Ether ETFs joined the excitement in July. The demand for those funds has not been as strong as for their bitcoin counterparts, but the category has still attracted more than $2 billion in net inflows in less than six months, according to FactSet.
Strong tail winds for cryptocurrencies also lifted connected stocks to record levels. Bitcoin proxy Microstrategy has skyrocketed more than 360% since the start of the year, while Coinbase and Robinhood have rallied about 43% and 196%, respectively. MicroStrategy shares have surged since mid-December as the company was added into the Nasdaq 100 index.
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Some mining stocks, however, haven't performed as well, with Mara Holdings and Riot Platforms on track for double-digit year-to-date losses. The drop in mining stocks may be a direct result of this year's bitcoin halving, which reduced the block rewards. Along with transaction fees, this is one of the most significant ways miners make money.
— CNBC's Jesse Pound contributed reporting.
