On November 3, 2024, 137Labs hosted an X Space event themed 'Discussion on the Crypto Outlook in the Election Year: How Different Candidates Taking Office Will Affect Industry Development.' The event invited several senior experts in the Web3 field, including Robert Wang, Managing Director of Solomon Global Asset Management, Stephen, founder of 55.land, Ivan, analyst at 137Labs, and Oneone, research director, for an in-depth discussion on the upcoming U.S. election and its far-reaching impact on the crypto industry.
During the event, guests conducted a multidimensional analysis of the potential changes in the crypto market brought about by different candidates taking office, covering the current state of the Biden administration's crypto policies, the positions of the two party candidates on crypto, and the roles of supporters and institutions in the election. They also discussed the impact of election uncertainties on investment strategies and analyzed how potential policy directions could shape development trends in specific tracks like Web3, DeFi, stablecoins, and RWA.
Through this article, you will understand how the U.S. election becomes a key influencing factor in the crypto market, how it affects institutional investment and financing strategies, and how different policy directions will shape the landscape of the crypto industry in the coming years.
Q1
The Biden Administration's Attitude Towards Crypto: What impacts has the 'crypto financial order' in Biden's policies had on the market?
Ivan pointed out several key impacts. First, the regulatory environment under the Biden administration is unstable, with different enforcement agencies competing for jurisdiction over cryptocurrencies, leading to a lack of consistency in policies. Furthermore, the government has adopted an overly interventionist approach to regulation, which, although justified by 'protecting consumers,' has abused discretion in execution, limiting the development potential of the crypto industry, especially early-stage projects.
The Biden administration also actively promotes the development of central bank digital currencies (CBDCs). An executive order signed in 2022 clarified the framework for digital asset development, focusing on exploring an American version of CBDC and strengthening regulatory measures such as anti-money laundering. However, CBDCs are not stablecoins; their launch will grant the government monitoring rights over every transaction, making the government both 'referee' and 'player' in the digital currency space, which will affect market freedom and privacy.
Overall, although the Biden administration hopes to enhance market compliance and security, its policies have also added market uncertainty, posing significant challenges, especially for decentralized innovation projects.
Q2
Campaign Platform: What are the positions of the two party candidates on cryptocurrency? Harris leans towards 'strong regulation' and government intervention, while Trump emphasizes 'stopping the issuance of CBDC' and 'free stablecoins.' How will the policy directions of both affect Web3?
Ivan
Harris: Strong Regulation and Government Intervention
As Vice President under the Biden administration, Harris has continued the government's current 'strong regulation' approach to crypto regulation. Her campaign platform emphasizes high welfare, high taxes, and a 'big government' management style, planning to raise the corporate tax rate to 28% and even proposing taxes on unrealized capital gains, which has sparked widespread controversy. Given the Biden administration's harsh regulation of the crypto market, Harris's policy direction is likely to continue strengthening intervention in the crypto industry, reinforcing government enforcement in the crypto space. This 'strong regulation' strategy may stifle innovation, particularly for Web3 and DeFi projects that require flexible development space, and policy risks may further increase.
Trump: Opposes CBDC and Favors Free Market Approach
Trump's crypto policy proposals sharply contrast with Harris's. He advocates for low taxes and a small government management style, including lowering corporate tax rates to stimulate the economy. On cryptocurrencies, Trump opposes the issuance of CBDCs, believing that such government-led digital currencies would restrict market freedom. He promises to make the U.S. a global leader in the crypto industry and proposes replacing the current SEC chairman to reduce excessive market intervention. Additionally, Trump suggests including Bitcoin in the national strategic reserve, aiming to enhance the strategic status of crypto assets at the national level. This free market orientation further supports the development of decentralized technologies, potentially fostering a more relaxed innovation environment for Web3 projects.
Q3
How do you view the Trump family's 'World Liberty' plan? Will Trump's 'small government' policy proposals make the U.S. a crypto-friendly country? Will this policy trigger an acceleration of development in the crypto industry?
The Trump family's 'World Liberty Foundation' (WLF) plans further demonstrate their support for the crypto market. WLF has raised over $14 million, focusing on developing stablecoins and payment services. Led by the founder who previously headed Paxos (issuer of BUSD, which was investigated by the SEC), this project reflects the Trump family's emphasis on the stablecoin and decentralized payment sectors and indirectly confirms Trump's friendly stance towards the crypto industry.
With the continuous growth of the stablecoin market, the launch of WLF may reflect Trump's 'small government' policy, attracting more capital into the crypto payment sector. The high profit potential of stablecoin businesses can be glimpsed from Tether's $5.2 billion profit in the first half of 2024, indicating a broad outlook in this area. If Trump's policies continue to support the development of similar projects, the U.S. may gradually evolve into a crypto-friendly nation, laying a policy foundation for the accelerated development of the industry.
Latest Election Situation and Voter Demands
Q4.1
What is the status of polls? What data does the prediction market show, and how is everyone interpreting it?
Ivan pointed out that voters are highly focused on polls and the probability prediction data from Polymarket. As a prediction market platform, Polymarket shows the likelihood of election outcomes through probability trading, with transaction volumes reaching $2.7 billion, though about one-third of transactions are considered wash trading, affecting the credibility of the data.
Ivan emphasizes that the probabilities on Polymarket reflect market sentiment and collective preferences of participants more than actual public opinion. Participants' betting motivations mainly fall into subjective bias and hedging needs, with many choosing to bet based on personal predictions or risk diversification. Thus, these probabilities are merely a collection of market preferences and cannot directly represent actual electoral situations.
Stephen believes that the current focus of voters on polls is particularly evident in key swing states. Voter sentiment in swing states like Pennsylvania, Michigan, Wisconsin, Arizona, and Georgia fluctuates significantly, especially independent voters who typically make their decisions right before the election, making polls particularly impactful in these states.
He pointed out that polls are not only predictive tools but also important references for voters and candidates. Voters in swing states use polls to understand the majority's tendencies on key issues. For example, voters in Pennsylvania and Wisconsin focus on the economy and employment, while those in Georgia and Arizona are more concerned about immigration policy and social equity issues. Candidates need to accurately understand the concerns of different groups through polls to formulate targeted strategies.
Overall, changes in polls in swing states become a barometer of the election, influencing voter sentiment and candidates' campaign strategies, and ultimately potentially swaying the election outcome.
Q4.2
Which celebrities, institutions, or funders support both sides, and which of these are crypto-related? How do the attitudes and support of the camps towards Web3 shape the campaign atmosphere? Will the bets of investors and venture capital firms influence candidates' positions on Web3?
Ivan pointed out that in this U.S. election, supporters, investors, and major institutions in the crypto industry have shown different support for the two candidates, which has partially shaped the candidates' positions on Web3.
Harris Camp Supporters
In the Harris camp, well-known billionaires and tech investors provide strong support. Ivan points out that Harris's supporters include billionaire Mark Cuban, LinkedIn founder, a16z's Ben Horowitz, and Ripple's founder. Notably, Horowitz does not solely support Harris but has also provided funding to Trump's camp, demonstrating his dual stance in the crypto and tech fields. Although the Ripple founder supports Harris, he has also been hit by excessive regulation, even leading to the termination of his personal banking operations, showing sensitivity to regulatory issues.
Trump Camp's Crypto Supporters
In Trump's camp, supporters include Elon Musk, Founders Fund founder Peter Thiel, as well as Marc Andreessen of a16z and the Winklevoss twins of Gemini. Additionally, the founder of Coinbase has publicly supported Trump's running mate, JD Vance. The support of these well-known figures in tech and finance not only enhances Trump's influence in the crypto industry but also shows a keen interest and potential support for Web3 technology.
Fairshake's Crypto Camp Action
Ivan also mentioned the 'Fairshake' initiative, a fundraising plan actively promoted by the crypto industry aimed at raising $200 million to support crypto-friendly lawmakers in various states. Fairshake is not limited to supporting Republican lawmakers but also includes some Democratic supporters, marking a significant enhancement of the crypto industry's influence in U.S. politics and representing an innovative breakthrough in electoral history.
Stephen added that regardless of who ultimately wins, with public opinion driving and more crypto-friendly lawmakers joining Congress, future governments may more actively support the crypto industry.
The actions of these crypto supporters and investors demonstrate that the crypto industry is not only a driver of technological innovation but is also actively shaping the political atmosphere of U.S. elections, gradually becoming an undeniable force in American politics.
Market Impact and Institutional Perspectives
Q5.1
Views of financial markets and Wall Street institutions on Bitcoin ETFs, what opinions do traditional finance and Wall Street institutions currently have on crypto, and how will this affect the future development of the crypto market?
Robert Wang pointed out that although Wall Street and traditional financial institutions are gradually accepting cryptocurrencies, this acceptance does not equate to complete trust in the concepts or technologies of the crypto market. Many institutions purchase crypto-related financial products such as Bitcoin ETFs more out of commercial interests rather than a long-term belief in cryptocurrencies themselves.
He further analyzed the market impact that Trump's election might bring: If Trump takes office, U.S. fiscal policy may shift towards easing, including increasing the fiscal deficit, cutting interest rates, and implementing a weak dollar policy. These policies would encourage capital flows into high-risk assets, driving demand for cryptocurrencies like Bitcoin and potentially allowing Bitcoin's price to break $80,000 in the short term.
Regarding Federal Reserve policies, Robert Wang mentioned that although the Fed has not stopped 'balance sheet reduction,' it maintains liquidity through interest rate cuts, which may temporarily boost the prices of risk assets, including cryptocurrencies. However, if liquidity tightens, the market may face severe fluctuations and adjustments. Even if a 'bull market' may occur in the short term, Wang reminds investors to be wary of risks when market liquidity changes, to avoid significant losses due to market volatility.
Despite short-term uncertainties, Robert Wang remains optimistic about the long-term prospects for the crypto market. He believes that as technology develops and institutions gradually accept it, crypto assets, especially Bitcoin, may increasingly be viewed as a safe-haven 'digital gold' and further solidify their market position amid increasing global economic uncertainty.
Q5.2
The crypto market's expected reactions to the election results and how crypto institutions view the uncertainties brought by the election year. How will this affect future crypto financing and project investments?
Ivan discussed in the X Space how crypto institutions respond to the uncertainties brought by the election year and how this will affect financing and project investment decisions.
BitMEX founder Arthur Hayes' strategy reflects the market's cautious attitude. Hayes plans to allocate 5% of his funds to stablecoins like sUSDe before the election, using a 13% annualized yield (APY) as a hedging measure, and will reconsider crypto investments only after the election results are clear. This shows that in the face of uncertainty, he prefers to temporarily shift to low-risk assets.
The research director of Galaxy Digital expects the crypto market to experience volatility before the election, especially under the circumstances of interest rate cut expectations and unclear election results, where market liquidity and price fluctuations may be more severe. Similarly, the extreme predictions proposed by Nansen's CEO depict an ideal scenario: if Trump is elected, Gary Gensler steps down, the Federal Reserve cuts interest rates, the Ukraine war ends, and the FIT 21 Act is passed, it could trigger the largest crypto bull market in history.
Overall, crypto institutions remain cautious during the election year, with many investors choosing to allocate to stablecoins and other low-risk assets to hedge against the shocks brought by electoral uncertainties. This not only affects short-term investment strategies but may also delay or adjust long-term financing and project investments until post-election policy directions become clearer.
Q6
Specific Track Discussion: How will the victory of different candidates affect industry development? What differences will arise from the victory of either side? Which specific tracks will benefit?
Oneone conducted a detailed analysis of the potential impact of the upcoming U.S. election on the crypto industry, believing that the victory of different candidates will significantly affect industry development, especially in terms of policy support and track benefits.
Trump Wins
If Trump wins, the DeFi, Bitcoin, Meme projects, and AI sectors in the crypto market may benefit more. Trump's camp leans towards decentralization and innovative technologies, and this relaxed regulatory attitude is conducive to the growth of decentralized projects like DeFi. Additionally, due to Trump's close relationship with the MAGA and other Meme cultures, Meme projects may also gain market attention. Regarding Bitcoin, Trump has previously proposed including it in the national reserve, which, if implemented, would provide strong support for Bitcoin. Furthermore, many of Trump's supporters include emerging tech entrepreneurs like Musk, suggesting that under his leadership, innovative projects combining blockchain and AI may have more room for development.
Harris Wins
The crypto market will tend to favor compliance and integration with traditional finance, and this policy direction is beneficial for projects like RWA digitization, stablecoins, and Bitcoin ETFs. The Harris administration is inclined to strengthen regulation, and although this policy may limit the rapid development of DeFi, it provides more security for compliant-friendly tracks like RWA, attracting mainstream capital into the space. Furthermore, the standardization of products like stablecoins and Bitcoin ETFs will also receive support, advancing the deep integration of the crypto market with traditional finance, further promoting market maturity.
Investment Strategy Recommendations: Hedging and Responding to Market Volatility
Oneone advises investors not to overbet on a single candidate during the election year and to take a hedging strategy. Based on diversified investments, they can utilize prediction markets for arbitrage to reduce risks brought by the uncertainties of election results. He reminds that as the election approaches, the balance of bullish and bearish options in the market indicates that investors are cautious about market trends. Recently, Bitcoin's volatility has significantly increased, and this trend may continue to escalate post-election, so investors should remain flexible and adjust investment strategies in response to policy changes.
Overall, regardless of who wins, the crypto industry will face different opportunities and challenges. Flexible market layouts and diversified investment strategies will help investors seize development opportunities in this election.
Conclusion
Through this in-depth discussion in X Space, the U.S. election, as a politically significant event attracting global attention, has begun to reveal its potential impact on the crypto industry. Guests analyzed how the elevation of different candidates could change the future landscape of the crypto industry, from policy orientations and market responses to specific tracks' benefits. Whether it's Trump's support for decentralized innovation or Harris's emphasis on compliance and the integration of traditional finance, both will drive the crypto industry forward in different directions.
In this complex policy environment, participants in the crypto market also demonstrate strong adaptability and caution, striving to seize opportunities amid uncertainty with diversified investment strategies and utilizing prediction markets. As the guests discussed, with the dust of the U.S. election settling, future policy directions may bring new opportunities and challenges to areas like DeFi, stablecoins, Bitcoin ETFs, and RWA.
This election is not only an important watershed for the crypto industry but also reveals how Web3 technology deeply intervenes in the global financial and political ecosystem. Regardless of the election outcome, the crypto industry will welcome broader development space and challenges under the new policy context, and participants will continue to lead this wave of technological change, collectively shaping the future of the crypto industry.
