“Tales from the Crypto” read the front-page teaser headline of a recent issue of the New York Post. Many readers likely recognized the allusion to the 1989-1996 HBO series Tales from the Crypt, co-created by William Gaines of Mad Magazine fame. On page 22, they discovered the article featured individuals who capitalized on the cryptocurrency price surge following the November 5 presidential election.
A 40-year-old crypto investor in Las Vegas spent $135,000 of his profits on a BMW X5M Competition, dubbing it his “grocery getter”—a complement to his Lamborghini, reserved for “more important” transportation. A Los Angeles-based crypto enthusiast cashed out $200,000 from the P’nut “meme coin” before it crashed post-November 13, using $150,000 for luxury watches (Audemars Piguet and Rolex) and gifting the remainder to his mother. Meanwhile, a college senior tending bar to support himself bought a camper van to explore the country as a podcaster.
While these lavish purchases may mesmerize some, they underscore the volatile nature of cryptocurrencies. Success stories often include chapters of hardship: the woman who chartered a private jet to the Formula One event in Las Vegas previously suffered losses during crypto crashes in 2017 and 2020. The BMW buyer saw his holdings evaporate in the 2022 collapse of Sam Bankman-Fried’s FTX exchange.
The cryptocurrency market, including Bitcoin, experienced a significant uptrend in 2024. Bitcoin recently hit $100,000, more than doubling from its January 23 low of $48,949.30. What explains this meteoric rise? A combination of factors:
Boom in Risky Assets
The 2024 market has been favorable for risky assets. The S&P 500 rose 25.0% year-to-date through December 6. Historically, the Bloomberg Bitcoin Index and S&P 500 have moved in the same direction 67.3% of the time, a statistically significant correlation at a 99% confidence level. While stocks and Bitcoin often align, Bitcoin’s price swings are far more pronounced. Since inception, the Bloomberg Bitcoin Index has seen average quarterly moves of 35.6%, compared to 5.5% for the S&P 500.
S&P500 Index vs. Normalized Bitcoin Price (2010-2024)
Source: Bloomberg Professional Services
Trump and Regulatory Winds of Change
Beyond general market conditions, Bitcoin benefited from expectations of a friendlier regulatory environment. President-elect Donald Trump, who styled himself as pro-crypto during his campaign, pledged to end the Biden administration’s practice of selling seized cryptocurrency. Post-election, SEC Chair Gary Gensler, who classified many crypto tokens as unregistered securities, announced his resignation. Trump’s nomination of Paul Atkins, a crypto industry advisor, for the SEC chairmanship further buoyed the market. These changes suggest a regulatory landscape more conducive to cryptocurrency growth.
Pivotal Events in 2024
Approval of Spot Bitcoin ETFs: On January 10, the SEC approved 11 spot Bitcoin ETF applications, a milestone that allowed retail investors to access Bitcoin through traditional portfolios without needing wallets or exchanges.
Bitcoin Halving: The fourth Bitcoin halving on April 19 reduced block rewards from 6.25 BTC to 3.125 BTC, tightening supply and potentially driving up prices.
Expansion of Financial Products: October saw the SEC’s accelerated approval for options trading on spot Bitcoin ETFs, integrating Bitcoin deeper into institutional finance.
Global Adoption: Major Bitcoin conferences in Amsterdam and Lugano highlighted growing worldwide interest in the cryptocurrency.
The Taxman
If you decide to cash out during a crypto upswing, keep tax implications in mind. As with other investments, cryptocurrency gains are taxable. Federal taxes on crypto profits depend on the holding period:
Short-term gains (held one year or less) are taxed at ordinary income rates.
Long-term gains (held over one year) benefit from lower capital gains rates.
For instance, a married couple filing jointly with a $300,000 combined income faces a 15% long-term capital gains tax rate. Selling a Bitcoin bought at $60,000 in October 2021 for $100,000 in December 2024 to purchase a luxury car would result in a $40,000 gain and a $6,000 tax bill. Gains are taxed only upon realization; holding assets avoids immediate tax consequences.
Key Takeaways
Cryptocurrencies surged in 2024, particularly post-election.
Bitcoin’s rally reflects broader trends in volatile asset markets.
Regulatory shifts may favor future price growth, though volatility persists.
Crypto profits are taxable, requiring careful planning.
2024 was a landmark year for Bitcoin, marked by dramatic gains and transformative events. While the future remains uncertain, the year’s developments solidified Bitcoin’s position as a prominent, albeit unpredictable, player in global finance.
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