US High School Economics class: Bitcoin hits $100,000 as Trump era hopes grow

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Bitcoin continues its historic surge past $100,000, driven by investor optimism about pro-cryptocurrency policies expected under President-elect Donald Trump’s administration. This article and assignment highlight key factors such as the appointment of crypto advocates to regulatory roles, the launch of institutional Bitcoin ETFs, and increased interest from major asset managers. The discussion also explores the role of government regulation, the nature of money and the broader economic implications of cryptocurrency adoption. 

Essential Question: How do government policies and market forces influence the adoption and value of cryptocurrencies like Bitcoin as a speculative store of value?

INSTRUCTIONS: Read the article and then answer the questions below. 

Bitcoin hits $100,000 as Trump era hopes grow

Introduction: Watch the video, How Cryptocurrency Works (2:14), and answer the following question. 

• How does cryptocurrency, like Bitcoin, work, and what role does blockchain technology play in its operation?

Part 1: Reading Questions

• Bitcoin’s price reached $100,000 due to increasing demand. How does this relate to the economic principle of scarcity, that productive resources are limited?

• How does Bitcoin compare to traditional fiat currency as a store of value?

• The substitution effect occurs when consumers or investors switch from one good, service, or asset to another due to a change in relative prices, making the substitute more attractive. How does the substitution effect explain the impact of institutional investments in cryptocurrency, such as ETFs, on Bitcoin’s price?

• What might be the opportunity cost for an individual or institution choosing to invest in Bitcoin versus traditional assets?

• Compare the potential risks and rewards of investing in cryptocurrencies to those of other investments like stocks or bonds

• If Bitcoin is considered a “store of value,” what external factors (eg policy, technology or global markets) could threaten its stability?

Part 2: Video — Is cryptocurrency part of an anarchist* plot? 

Instructions Watch the Video:  Is cryptocurrency part of an anarchist* plot? (4:16).  After viewing the video, respond to the discussion questions provided. Be sure to explain your reasoning clearly, using economic principles where relevant. * Anarchism is a political philosophy that advocates for a society organised without centralised authority, often emphasising voluntary co-operation and self-governance.

• How does Bitcoin embody a core tenet of anarchism through decentralisation, and why is this appealing to some users and investors?

• Bitcoin is often criticised for being too volatile to serve as a practical medium of exchange. How does this volatility affect its ability to function as money, particularly as a store of value?

• Cryptocurrencies like Bitcoin have been described as both an opportunity and a threat to the financial establishment. Explain how Bitcoin could destabilise traditional financial systems and what this means for central banks and governments

• Many governments are developing their own digital currencies, such as China’s digital yuan or the European Union’s planned digital euro. Compare how these state-backed digital currencies differ from decentralised cryptocurrencies like Bitcoin in their goals and potential impacts on the economy

Joel Miller and James Redelsheimer, Foundation for Economic Education.
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