The price of Bitcoin has soared to record levels in the week since Donald Trump won a second White House term, but a leading expert says the rally is driven by speculation, not policy.

The world’s most valuable cryptocurrency hit $133,000 on Tuesday, with the so-called ‘Trump bump’ driving it up 19 per cent since the US election and more than double the value it sank to towards the end of 2023.

Elsewhere, CoinDesk’s index of other cryptocurrencies is also soaring, with S&P Global’s cryptocurrency index measuring a 27.7 per cent gain across the crypto market in just a week.

That includes Dogecoin, a cryptocurrency that has historically enjoyed the support of key Trump backer Elon Musk.

Musk is positioned to occupy a key advisory role within the Trump administration, including on how US government agencies regulate companies.

The billionaire said late last year that he doesn’t “spend a lot of time thinking about cryptocurrency”.

“I have thought for a long time about money and the nature of money,” Musk said. “What is money? It’s really a database for resource allocation.”

Speculation drives crypto higher

RMIT University professor Angel Zhong said Trump was yet to announce any concrete policies that explained soaring cryptocurrency prices.

Instead, Zhong said investors were speculating about the incoming US president’s broad support for crypto more generally – in the hope he might do something to deregulate the market once he takes office.

After all, Trump has launched his own crypto currency and made suggestions during the campaign that Bitcoin could be used to address national debt.

“Elon Musk’s vocal support for cryptocurrencies, including Bitcoin and Dogecoin, has also played a significant role in boosting market confidence,” Zhong said.

“His influence and statements have historically impacted crypto prices, and his endorsement of Trump likely reinforces the belief that a more crypto-friendly environment is on the horizon.”

Additionally to Bitcoin, stocks in Musk’s electric car company Tesla have also soared after the US election, increasing more than 44 per cent since early last week.

Musk’s outsized personal stake in the business means those increases have increased his paper wealth by $70 billion in a week.

The share price of listed crypto exchange Coinbase is up 40 per cent since the election too.

Trump comes out for crypto

Trump was initially a cryptocurrency sceptic but has since reversed his position and has pledged to make the US the “crypto capital of the planet” and even create a “strategic reserve” of Bitcoin.

“The rules will be written by people who love your industry, not hate your industry,” Trump told a conference of cryptocurrency investors in July.

These promises weren’t cornerstones of his election campaign though and so it’s unclear whether the commitments will translate to policy during the Trump administration.

The Trump campaign did, however, accept campaign donations in the form of cryptocurrency. Trump also said he would “fire” US Securities and Exchange Commission chairman Gary Gensler, who has taken an aggressive line on crypto regulation.

Zhong said there’s more detail to come on what the Trump administration will mean for crypto markets, including Bitcoin.

“As the Trump administration takes office, I expect more clarity on crypto-related policy, especially during the 100-day presidential honeymoon period,” Zhong said.