Author: James Hunt
Translation: Blockchain in Plain Language
With the outcome of the U.S. presidential election settled, what changes will the cryptocurrency industry face next after Donald Trump's victory?
In this year's campaign, Trump demonstrated a brand new pro-cryptocurrency stance and for the first time made cryptocurrency policy an important issue, making a series of commitments. His commitments include firing SEC Chairman Gary Gensler on 'day one', reducing the sentence of Silk Road founder Ross Ulbricht, establishing a presidential cryptocurrency advisory council, abolishing SAB 121, ending 'Operation Choke Point 2.0', transforming the U.S. into a 'strong nation' for Bitcoin mining, and establishing a national strategic Bitcoin reserve.
As the presidency, Senate, and House of Representatives could potentially be fully controlled by the Republican Party, there is growing optimism in the cryptocurrency community that these commitments can be quickly fulfilled.
1. New SEC Chairman
During the Biden administration, the SEC played a key role in cryptocurrency regulation. Current Chairman Gary Gensler argues that most cryptocurrencies fall under securities and urges relevant agencies to register according to existing regulations. The agency has also engaged in numerous legal battles with significant industry players like Coinbase, BN, Kraken, and Robinhood, as well as DeFi, NFT, and stablecoin projects.
Although Gensler may choose to continue serving as an SEC commissioner under the Trump administration, reports suggest he is likely to resign.
Regarding who will succeed the chair position, there is widespread speculation that Trump may appoint current Republican SEC Commissioner Hester Peirce, who is known as 'Crypto Mom' for her supportive stance in the cryptocurrency field. Peirce has long criticized the SEC's enforcement actions in the sector and the failure to approve spot cryptocurrency trading products before being sued. However, Peirce previously stated she is not interested in the chair position, making the only other Republican commissioner, Mark Uyeda, a popular candidate who is also friendly towards cryptocurrency. On the other hand, Trump may also nominate a new commissioner, with analysts pointing out that former CFTC Chairman Chris Giancarlo is a candidate being considered.
Jake Chervinsky, Chief Legal Officer of Variant Fund, stated that the chances of Peirce becoming chair are low, as she does not seem interested in the position. He believes: 'The probability of Uyeda taking office is not small, but I expect Trump may prefer to appoint someone he selects himself.' He added: 'In reality, serving as chair is a very challenging and thankless position. Some commissioners (like Uyeda) may be interested, but others may feel they have done their duty and wish to pursue new opportunities.'
However, there are still two and a half months until Trump officially takes office, and cryptocurrency policy may change before the new leadership takes over federal agencies. Chervinsky warned that during this time, the current administration may be 'busy finalizing rules and initiating enforcement actions'.
He stated: 'Trump's primary crypto policy task must be to end Biden's attempts to suppress the industry through enforcement. This means reversing the SEC's unreasonable enforcement actions and the Justice Department's prosecution of Tornado Cash.'
2. Pro-cryptocurrency regulation
Under Trump's leadership, advancing the (Bitcoin Bill) has become one of the most anticipated policies, establishing Bitcoin as a strategic reserve asset, with plans for the U.S. government to hold up to 5% of the total Bitcoin supply (21 million coins). This bill is formally titled the (2024 National Optimized Investment Promotion Innovation, Technology, and Competitiveness Act), abbreviated as the (2024 Bitcoin Bill), proposed by Wyoming Republican Senator Cynthia Lummis in July of this year.
After the election results were announced, Donald Trump won the presidency, and the Republican Party regained control of the Senate while expected to continue its control of the House. Lummis posted on the X platform, stating: 'We will establish a strategic Bitcoin reserve.'
Analysts Peter Chung and Min Jung from Presto explained: 'If the Republican Party achieves full control of the presidency, Senate, and House, the chances of many crypto-related bills passing in Congress, including Lummis' Bitcoin Strategic Reserve Act, will significantly increase.'
At the 2024 Bitcoin Conference held in Nashville this summer, Travis Kling, Chief Investment Officer of Ikigai, stated that he believes this plan is nearly impossible to achieve. 'It sounds like an insurmountable gap, almost too optimistic to be credible. But with the strong victory of the Republican Party, the chances of this plan have greatly increased. If it really happens, we will all win (WAGMI, meaning 'We All Gonna Make It').'
James Butterfill, Head of Research at CoinShares, wrote on Wednesday that this initiative would elevate Bitcoin's status similar to gold, making it part of national reserves and marking a historic step towards legalization. He stated: 'If the (Bitcoin Bill) is implemented, it may greatly stimulate institutional and government interest in Bitcoin, accelerating its growth and pushing its value to new highs.'
According to analysts at research and brokerage firm Bernstein, Trump's victory has shifted the regulatory environment for cryptocurrencies from headwinds to tailwinds, with the Senate Banking Committee expected to become more pro-cryptocurrency. This means other crypto legislation will progress more quickly, especially regarding stablecoin and market structure bills, benefiting U.S. trading platforms and stablecoin issuers like Circle and Paxos.
Matt Hougan, Chief Investment Officer of Bitwise, pointed out that among Trump's other policy commitments, the ending of 'Operation Choke Point 2.0' will loosen restrictions on cryptocurrency access to the traditional banking system. Moreover, the repeal of the controversial SEC announcement SAB 121 may pave the way for traditional banks to accept more crypto companies as clients and allow them to hold and custody Bitcoin themselves.
However, one constant factor after the election is the U.S. deficit of $36 trillion, increasing by $1 trillion every 100 days. Hougan pointed out that according to the Congressional Budget Office's forecasts, this trend may continue or even worsen under Trump's policies. With the Federal Reserve potentially lowering interest rates, combined with an uncertain economic environment, Bitcoin will become a 'must-have' asset for investors.
3. Bitcoin mining incentives and the release of Ross Ulbricht (founder of the dark web market 'Silk Road')
Incentives for Bitcoin miners in the U.S. may further expand the current dominance and consolidation trend of domestic publicly listed operators. This situation could impact the industry's current diversification into AI data center hosting in the difficult environment following the halving.
Lastly, one of Trump's most popular commitments in the cryptocurrency community and among the wider public may be releasing Ross Ulbricht after taking office. Ulbricht was sentenced to life in prison without parole for creating and operating the dark web market 'Silk Road', which is closely associated with Bitcoin's early history.
Early Bitcoin player Amir Taaki quickly reminded President-elect Trump on Wednesday to fulfill his promise to reduce Ulbricht's sentence and urged for his swift release. Taaki stated: 'I owe everything to Ross Ulbricht. Cryptocurrency changed my life. The growth of cryptocurrency is inseparable from his contributions. He made the ultimate sacrifice, and we all benefit from his work.'
4. Market Impact
Butterfill from CoinShares pointed out that Trump's proposal to appoint billionaire supporter Elon Musk to lead a new 'Department of Government Efficiency' responsible for cutting approximately $2 trillion in federal spending suggests that more accommodative monetary policies may be adopted in the future to balance this plan. He stated that historically, loose monetary policy and fiscal conservatism have been beneficial for Bitcoin, enhancing its appeal as a hedge against currency devaluation and inflation, attracting investors looking to avoid traditional economic risks.
BRN analyst Valentin Fournier stated: 'Trump's election provides strong bullish reasons for the market, with expected upcoming interest rate cuts and global stimulus measures further boosting the economy and supporting Bitcoin's performance. Although Trump will officially take office in January next year, we expect Bitcoin to maintain its strength before the end of the year.' He also mentioned: 'Ethereum has risen 20% in the past three days, slightly narrowing the gap with Bitcoin after previously underperforming. However, we believe this rally is temporary, and Bitcoin may continue to lead in the coming weeks.'
According to The Block's price page, Bitcoin is currently trading at $74,967, up 1.7% in the past 24 hours and 77.4% year-to-date. In comparison, Ethereum's current trading price is $2,818, up 7.6% in the past 24 hours. However, Ethereum's year-to-date increase is 23.7%, underperforming other crypto assets.
Ryan Lee, Chief Analyst at Bitget Research, stated: 'With Trump being reelected as president, the initial market reaction may be off-market funds entering out of fear, pushing Bitcoin prices to new highs. In the coming days, net inflows into BTC ETFs may appear, indicating that Wall Street institutions are optimistic about the market outlook. The long-short ratio in the futures market is below 1, which means institutional investors in the crypto market are taking long positions through futures. The market is currently in a broadly bullish phase.'
Bernstein analysts reiterated their prediction on Wednesday, expecting Bitcoin to approach $90,000 by the end of this year and reach $200,000 as a bull market target in 2025. Bitwise's Hougan has similar target predictions.
