NEW YORK (AP) — As money continues to flow into crypto after Donald Trump’s victory last week, bitcoin has soared to yet another record high.

The world’s largest cryptocurrency reached the $87,000 mark for the first time on Monday. At around 3:45 PM ET, Bitcoin’s price was at $87,083, per CoinDesk, up more than 28% in the past week alone.

That’s part of a rally between cryptocurrencies and crypto-related investments since Trump won the US presidential election last week. Analysts attribute much of the recent gains to the expected “crypto-friendly” nature of the incoming administration, which could translate into greater regulatory clarity, as well as wiggle room.

Still, as in everything in the volatile cryptoversethe future is difficult to predict. And while some are optimistic, others continue to warn of investment risks.

Here’s what you need to know.

Make a backup. What is cryptocurrency again?

Cryptocurrency has been around for a while, but has increasingly come into the spotlight in recent years.

In basic terms, cryptocurrency is digital money. This type of currency is designed to operate over an online network with no central authority – meaning it is typically not backed by a government or banking institution – and transactions are recorded using technology called blockchain.

Bitcoin is the largest and oldest cryptocurrency, although other assets such as Ethereum, Tether and Dogecoin have gained popularity over the years. Some investors see cryptocurrency as a ‘digital alternative’ to traditional money – but it can be highly volatile and dependent on larger market conditions.

Why are bitcoin and other crypto assets soaring now?

A lot has to do with the results of last week’s elections.

Trump was previously a crypto skeptic, but changed his mind and embraced cryptocurrencies during this year’s presidential race. He has promised to make the US “the crypto capital of the planet” and create a “strategic reserve” of bitcoin. His campaign accepted cryptocurrency donations and he courted fans at a bitcoin conference in July. He also launched World Liberty Financial, a new venture with family members to trade cryptocurrencies.

Crypto industry players welcomed Trump’s victory, hoping he could implement regulatory changes they have long lobbied for. And Trump had previously promised that, if elected, he would fire Securities and Exchange Commission Chairman Gary Gensler, who has led the U.S. government’s crackdown on the crypto industry and repeatedly called for more surveillance.

“Crypto rallied as Election Day progressed into the night and as it became increasingly clear that Trump would emerge victorious,” Citi analysts David Glass and Alex Saunders wrote in a research note Friday, noting the broader sentiment in the sector that Trump would be “crypto-friendly”. and a possible shift in regulations.

Even before the post-election rally, assets like bitcoin posted notable gains over the past year. Much of the credit goes to the early success of a new way to invest in the asset: spot bitcoin ETFsthat were approved by US regulators in January.

Inflow in Spotting ETFsor exchange-traded funds, “have been the dominant driver of Bitcoin returns for some time, and we expect this relationship to continue in the near term,” Glass and Saunders noted. They added that spot crypto ETFs saw some of the largest inflows ever in the days after the election.

What are the risks?

Crypto assets like bitcoin have a history of drastic fluctuations in value – which can happen suddenly and over the weekend or overnight during all-hours, every-day trading.

In short, history shows that you can lose money as quickly as you make it. Long-term price behavior depends on larger market conditions.

At the start of the COVID-19 pandemic, Bitcoin was at just over $5,000. Its price rose to nearly $69,000 in November 2021, at a time marked by high demand for technology assets, but later collapsed amid an aggressive series of rate hikes by the Federal Reserve aimed at curbing inflation. Then came the 2022 collapse of FTXwhich significantly undermined confidence in crypto in general.

Early last year, a single bitcoin could be purchased for less than $17,000. However, investors started are returning in large numbers as inflation began to cool – and profits soared thanks to anticipation and the early success of spot ETFs. While some crypto proponents see the potential for more record-breaking days, experts still emphasize caution, especially for investors with small pockets.

“Investors should only get into crypto with money they are willing to lose,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. said last week. “Because we’ve seen these wild swings in the past.”

What about the climate impact?

Assets like bitcoin are produced through a process called mining consumes a lot of energy. And operations using polluting sources have raised particular concerns over the years.

Recent research published by the United Nations University and the journal Earth’s Future found that the carbon footprint of bitcoin mining in 76 countries in 2020-2021 was equivalent to the emissions from burning 84 billion pounds of coal or operating 190 natural gas-fired power plants. Coal provided the majority of Bitcoin’s electricity needs (45%), followed by natural gas (21%) and hydropower (16%).

In the US the Energy Information Administration notes that crypto mining across the country has “grown very rapidly in recent years,” adding that grid planners are beginning to express concerns about the increase in related electricity demand. Preliminary estimates released by the EIA in February suggest that annual electricity consumption from crypto mining likely represents between 0.6% and 2.3% of US electricity consumption.

Environmental impacts of bitcoin mining largely comes down to the energy source used. Industry analysts have maintained that clean energy use has increased in recent years, coinciding with increasing calls for climate protection from regulators around the world.

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AP Business Writer Kelvin Chan contributed to this report from London.