Bitcoin has soared to a record high of above $81,000 (£62,792) per coin following the election of Donald Trump and the expectation that the Republicans will win both Houses of Congress.
During the campaign, Mr Trump embraced digital assets – promising to make the US the “crypto capital of the planet” and to accumulate a national stockpile of Bitcoin.
Russ Mould, investment director at AJ Bell said: “Bitcoin is the one asset that was always going to soar if Mr Trump returned to the White House. A brief jump to $75,281 put the cryptocurrency at a new all-time high and fired up traders to speculate when, not if, it will smash through $100,000.
“Mr Trump has already declared his love of the digital currency and crypto traders now have a new narrative by which to get even more excited about where the price could go.”
The Bitcoin price is up 95pc so far this year, and over 800,000pc since it started trading on crypto exchanges over a decade ago, according to data from eToro.
Dubbed “digital gold”, Bitcoin has likewise been considered a hedge against inflation. But the world’s most famous cryptocurrency has a chequered history and its price is notoriously volatile.
So is now a good time to buy? Telegraph Money takes a look at what you need to know. This guide will cover:
With Republicans poised to take both chambers of Congress, the prevailing view is that the President-elect will usher in a regulatory environment that is more favourable to cryptocurrencies.
The cryptocurrency industry spent around $130m backing pro-crypto candidates, Bloomberg reported.
Furthermore, Mr Trump has committed to removing the current leadership of the Securities and Exchange Commission that is battling crypto companies in court, including crypto-exchange Coinbase.
Other cryptocurrencies including Dogecoin – long favoured by Elon Musk, the richest man in the world and Trump ally – have risen even higher and outperformed Bitcoin as investors bet on the market as a whole.
While the rally shows strong signs of continuing, cryptocurrency is not for the faint-hearted – and many investors are still choosing to steer clear of it.
Clem Chambers, chief executive of Online Blockchain said: “Crypto denizens should hold, speculators should gamble, and investors should look elsewhere for less dangerous places to risk their hard-earned money.
“Bitcoin is a high-risk, speculative asset, which is why so many people love to gamble with it. In speculation, the answer is: ‘If you have to ask, the answer is no.’ However, Bitcoin is highly likely to head for $100,000 a coin and potentially hit much higher levels in a short-term bubble climax.”
Joel Kruger, of LMAX Group, an exchange, added that the dollar has rallied in the aftermath of the election but warned that this trend may end soon. This, in turn, may lead to further momentum for crypto assets towards the end of the year which are less linked to the real economy, he predicted.
At the same time, Mr Chambers noted that avoiding the post-boom Bitcoin crash, an often-repeated cycle, is going to be tricky.
Prices can be notoriously volatile, as the Bitcoin cycle below shows.
When it comes to investing, or speculating, in Bitcoin, timing is everything.
The Bank of International Settlements estimates that around three-quarters of Bitcoin buyers between 2015 and 2022 were likely to have lost money, despite a huge rise in the price of the cryptocurrency – almost certainly because they entered the market at precisely the wrong time.
Javier Molina, market analyst at investment platform eToro, said that while Mr Trump’s victory presents an “interesting outlook” for cryptocurrencies, it is not without risks.
He adds: “It’s intriguing to see how some ‘memecoins’ like Dogecoin have gained 20pc amid these lofty expectations, which, in my view, may be challenging to fulfil.”
While the vast majority of Bitcoin investors are individuals, large or “institutional” investors have also been trading.
Venerable City fund group Ruffer made a £540m profit after buying and selling Bitcoin several years ago, while earlier this month an unnamed pension fund was also revealed to have invested in the cryptocurrency.
If you’re comfortable with the risks, you can purchase Bitcoin and other cryptocurrencies either from specialist online exchanges, or directly from other people via marketplaces.
Among the UK cryptocurrency exchanges are Coinbase, Robinhood, Gemini and eToro. These exchanges make it easy to buy and sell Bitcoin and other cryptocurrencies from your smartphone, tablet or computer.
Platforms either charge a percentage of a trade or a fixed fee, though some offer free trades. There might also be a subscription option where you pay a regular sum and trades are free.