A Crypto “Euphoria”: What a Trump Presidency Means for Bitcoin & Their Counterparts
If you were to run a sentiment analysis on this weeks news broadcasts, odds are you’d hear the word “Trump” at a ratio of about once in every ten words. Closely followed is a constituent of “Trump”, “Bitcoin.” These two forces now feel inextricably linked, and it’s only the appetizer to the next four years in fintech. On the Monday after Trump’s victory, Bitcoin’s market price hit an all-time high, climbing as much as 3% to $81,854.98- a price point it hadn't previously breached. Needless to say, the euphoria surrounding Trump’s promises to “go all in on crypto” and turn the U.S. into the global hub for digital currencies fueled investor sentiment. While Bitcoin buyers engage in a debaucherous golden era, the question becomes:
What will it take for Donald Trump to deliver on his promise to turn the US into the “crypto capital of the world”?
Susannah Streeter, head of markets at Hargreaves Lansdown, attributed the upward price movement to the belief that the Trump administration would usher in a friendlier regulatory environment. “His pledge to make the U.S. the crypto capital of the world sent Bitcoin to fresh heady heights,” she remarked. Bitcoin’s rally continued, with some analysts predicting investor optimism is capable of driving Bitcoin to $100,000 before year-end.
This surge can primarily be attributed to ETFs* which offer guaranteed liquidity. According to Citi analysts, $2.01 billion flowed into Bitcoin ETFs and $132 million into Ethereum ETFs over the two days following the election.
While Bitcoin was the star of the show, other cryptocurrencies—particularly Ethereum and Cardano—also benefitted from election-related optimism. Ethereum, which had been under pressure for much of the year, surged by 30% over the span of just one week, pushing its price back above $3,000. Despite a minor pause in the price movement, Ethereum continued to demonstrate strength, riding on the coattails of Bitcoin's triumph.
Etherereum market cap since November 5th, courtesy of Coin Market Cap
Cardano, the decentralized finance (DeFi) token, ticked 1.7% higher, reflecting the broader bullish sentiment across the market. XRP, another major altcoin, took a brief breather after a period of growth, while Dogecoin continued its upward trajectory, rising by almost 8%. These smaller, often more speculative tokens benefited from the general "crypto euphoria" surrounding Trump's win and the potential for positive regulatory change.
The rally wasn’t just driven by retail investors. Institutional players, who had been cautiously observing the space, also jumped in with notable investments. Coinbase surged by 15%, and MicroStrategy, infamous for its aggressive strategy, advanced 12%. These movements reflect the growing mainstream acceptance of cryptocurrencies as a legitimate asset class, buoyed by a more crypto-friendly stance from the U.S. government under Trump.
The Trump administration's rhetoric about fostering a crypto-friendly environment helped legitimize these investments. At the same time, the market saw a rise in the adoption of Bitcoin and Ethereum by institutional investors who were betting on a future where cryptocurrencies would play a significant role in both the global financial system and individual portfolios.
Trump’s Crypto Pledge: A U.S. Regulation Disruptor
One of the most notable aspects of Trump’s approach to cryptocurrencies was his vocal support for the industry during his campaign. While these promises were aspirational, they resonated deeply with crypto advocates who hoped that the U.S. would ease regulatory burdens that had previously stifled innovation in the sector.
Trump’s efforts to potentially unseat SEC Chairman Gary Gensler, a vocal critic of the crypto market, were another indication that the president was willing to stand up for digital assets. Despite not having the power to remove Gensler from his post, the president’s stance fueled speculation that his administration would take a more favorable approach to crypto regulation than his predecessors.
The promise of a “more clement regulatory environment” became a key driver for Bitcoin’s price during this period, as speculators bet on favorable regulations in the future. Analysts pointed to the U.S. government’s potential to build up a “reserve crypto fund,” which could further increase demand for digital currencies and institutional interest in the space.
The bottom line: contingencies & what Trump’s administration would need to do to keep crypto thriving
Implement regulatory clarity: The Trump administration must establish clear, pro-crypto regulations to attract institutional investment (regulatory certainty).
Pervade the SEC with pro-crypto reps: Reducing the SEC’s scrutiny of crypto assets would facilitate easier token offerings and lower barriers to entry, encouraging innovation and growth in the U.S. crypto market. With Gensler likely stepping down within Trump’s first week in office, the President and his constituents have an opportunity to appoint a crypto-rep of their choosing.
Introduce tax policies with crypto write-offs: Lowering or eliminating capital gains taxes on digital assets, especially for crypto-to-crypto trades, would incentivize holding and trading, increasing market demand and liquidity.
Foster financial innovation: Implement policies promoting blockchain research and funding crypto-based financial products to drive U.S. leadership in the space.
Embrace of de-dollarization: Trump’s stance on reducing reliance on the U.S. dollar in global markets could align with crypto’s decentralized appeal, potentially fostering more adoption and legitimacy for cryptocurrencies internationally.
Disperse Central Bank Digital Currencies (CBDCs): If Trump takes a stance against government-controlled digital currencies, it would likely signal support for private, decentralized cryptocurrencies, enhancing their appeal as alternatives to CBDCs.
While Trump’s actual ability to enact sweeping crypto reforms was limited by political realities, one thing is for sure: his promises to champion the industry undoubtedly had investor sentiment at an all-time-high. The U.S. crypto market, now more established than ever, is primed for further growth, and future administrations will likely inherit the groundwork laid by Trump’s rhetoric and policies.
Trump’s hands-off approach to regulation allowed innovation to flourish, but questions remain about how future administrations will address crypto regulation. What is clear, however, is that the trajectory of cryptocurrencies will likely continue upward, fueled in part by the momentum generated during Trump’s presidency. Whether or not his promises fully materialize, the crypto market is now firmly on the map as a major player in the global financial system. Grab your popcorn.
Word Bank:
*ETFs: Exchange-traded funds are funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours- usually lowering your risk and exposure while helping to diversify your portfolio.
*CBDCs: Digital versions of a country's official currency, issued and regulated by the central bank to facilitate secure electronic transactions. As of now, the United States does not have an official Central Bank Digital Currency, but the Federal Reserve has been dipping their toes in via pilot projects.
