There's no denying that Bitcoin (BTC 2.31%) is having a magnificent year in 2024. It's now up 130% year to date, and finally appears to be tipping into the mainstream after hitting a price of $100,000 after the presidential election.

But Bitcoin was up 155% last year, 303% in 2020, 1,369% in 2017, and 5,481% in 2013. So what makes this Bitcoin rally different from these earlier rallies? Let's take a closer look.

The launch of the spot Bitcoin ETFs

One key factor behind this year's rally was the launch of the new spot Bitcoin exchange-traded funds (ETFs) in January. These new ETFs immediately started attracting investor inflows, and have now accumulated tens of billions of dollars in assets under management. The largest spot Bitcoin ETF, the iShares Bitcoin Trust (IBIT 1.74%), now has $53 billion in assets under management.

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And these inflows show no signs of slowing anytime soon as we head into 2025. In the first two weeks of December alone, a total of $4.4 billion flowed into these spot Bitcoin ETFs. On two of those days (Dec. 3 and Dec. 12), more than $500 million flowed into these ETFs. And the growing consensus is that investor inflows into Bitcoin ETFs could actually increase in 2025.

That's important for one very crucial reason: All this new buying pressure helps to provide a very nice floor for the price of Bitcoin. In other words, the Bitcoin ETFs can help to soak up any excess selling pressure that might exist in the crypto market.

Some Bitcoin investors might be tempted to take profits now that Bitcoin has broken through the $100,000 mark. But guess what? There are likely to be even more buyers, all of them attempting to pile into Bitcoin via the ETFs.

Thus, this Bitcoin rally seems to have more legs than previous rallies. Earlier rallies, quite frankly, seemed more like short-lived, speculative frenzies. This rally, in contrast, seems to have much broader support -- not just from individual investors, but also from large institutional investors, who are using these ETFs to diversify their portfolios.

The pro-crypto Trump administration

Bitcoin's recent post-election rally can be attributed to one key factor: the pro-crypto policies of the incoming Trump administration. During the summer, Bitcoin suddenly emerged as a campaign issue, and President-elect Donald Trump has continued to tout his support for crypto since then. Most recently, he appeared on the floor of the New York Stock Exchange, talking about his plans for crypto.

As proof of his commitment to the crypto industry, Trump recently said he would nominate a pro-crypto candidate to head the Securities and Exchange Commission (SEC). He also is creating the the brand-new position of "White House AI and crypto czar," which should help him keep tabs on important developments happening within the crypto industry. That's on top of earlier promises to support the Bitcoin mining industry, and to transform America into the "crypto capital of the world."

And there's one more step that Trump is likely to take that could absolutely send the price of Bitcoin skyrocketing: the creation of a strategic national Bitcoin reserve. According to current plans, this would commit the U.S. government to buying 200,000 Bitcoins per year for the next five years. At the end of that five-year period, the U.S. would own 5% of the total Bitcoin supply in the world.

This type of broad-based support for Bitcoin is something that has never existed before. As a result, public perception of Bitcoin is shifting very rapidly. Just a few years ago, Bitcoin was looked upon as something that only made sense for conducting illegal economic activity. It's now looked upon as a potential hedge against inflation, and a way to build generational wealth.

Where does Bitcoin go from here?

The most exciting part of this Bitcoin rally is that it might be longer and more sustained than previous Bitcoin rallies. For example, Bitcoin soared 5,481% in 2013. But in 2014, the price of Bitcoin collapsed by 58%. In 2017, Bitcoin skyrocketed by 1,369%. But it promptly gave back all those gains in 2018, falling by 73.5%. In 2020, Bitcoin soared by 303%. But in 2022, it fell by 64%. This volatile nature of Bitcoin is what has made it so risky in the eyes of many investors.

So, if you're a Bitcoin investor, keep your fingers crossed. In a best-case scenario, the spot Bitcoin ETFs will soak up any excess selling pressure that exists in the crypto market, helping to reduce some of the volatility of Bitcoin. And if the Trump administration is able to follow through on its pro-crypto promises, the price of Bitcoin might rally for the next four years.