Trump's election is an opportunity, but it is also full of challenges.

Written by: Wu Tianyi, DeThings

On November 6, Donald Trump announced his victory in a speech to supporters at local time early in the morning. FoxBusiness crypto reporter Eleanor Terrett also stated that, in fact, the first "crypto president" will now be Trump. Meanwhile, buoyed by the news, Bitcoin broke its historical high, reaching $75,000.

In the months leading up to the election, Trump's traditionally anti-crypto stance shifted, positioning himself as a supporter of cryptocurrency and promising to end the "persecution" of the industry, attracting support from Silicon Valley crypto investors, including Andreessen Horowitz and the Winklevoss brothers. In August of this year, Trump even expressed his desire to make the U.S. the "crypto capital of the world." Executives and investors in the crypto industry expressed anticipation for Trump's commitments, especially regarding the potential firing of the controversial U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, who has initiated multiple lawsuits against crypto companies.

However, the potential impact of Trump's victory still needs further observation. Supporters are looking forward to more lenient regulatory policies and a friendly legislative environment for the industry, particularly concerning the possible changes in the position of SEC Chairman Gary Gensler.

Nonetheless, Trump's unprincipled style of action has kept some industry insiders cautious, fearing that his promises may be superficial. As cryptocurrency moves toward the mainstream, new regulations and policies will become key factors. For the crypto industry, Trump's election is an opportunity, but it is also full of challenges.

Moving Toward the Mainstream

Trump's statements on the U.S. political stage are generating widespread attention regarding Bitcoin and cryptocurrency, marking Bitcoin's gradual transition from an underground market to the core of American politics. Trump emphasizes that Bitcoin is not only an important component of the future economy but also a technological innovation that the U.S. should lead.

Trump compares Bitcoin to the steel industry a century ago, arguing that Bitcoin has not only become one of the most valuable assets globally but its scale even surpasses traditional energy giants like ExxonMobil.

He clearly states that his support for cryptocurrency is based on "America First," warning that if the U.S. does not take action, other countries like China will dominate this field. Therefore, Trump emphasizes that the U.S. must maintain its leading position in technology, science, manufacturing, artificial intelligence, and space.

Despite the significant energy consumption of Bitcoin mining, Trump claims that the U.S. electricity output will exceed its total consumption, thus supporting the sustainability of Bitcoin mining. Additionally, Trump points out that approximately 175 million people are involved in Bitcoin and cryptocurrency-related activities globally, indicating the enormous potential of the crypto market.

He also criticized the Biden administration's regulation of cryptocurrency, arguing that the government has waged an "unprecedented war" that restricts Americans' freedom to participate in digital assets and portrays crypto companies as criminals, hindering the industry's development. Trump asserts that Bitcoin symbolizes freedom, sovereignty, and independence from government interference, criticizing the Biden administration's repressive policies as contrary to the American spirit.

Industry insiders believe that Trump's election could lead to a more lenient regulatory environment, increasing the chances of crypto-related bills passing in Congress.

Reflecting on Trump's "Last Time"

Looking back at Trump's first term (2017-2021), it brought profound impacts both domestically and internationally. His presidency not only reshaped American politics but also significantly altered the international landscape, particularly in terms of foreign policy, economy, society, and domestic politics.

Trump's leadership style is highly controversial and extreme. His rhetoric and policies have intensified political polarization and social division within the U.S. While he garnered enthusiastic support from his base, particularly among white working-class voters, conservative Christians, and populists, his anti-immigration stance, attacks on the media, and constant accusations of "fake news" have deepened the divide between Democrats and their supporters.

This polarized political situation has exacerbated societal rifts, with extremist and racist rhetoric experiencing a resurgence during Trump's tenure. Trump's criticism of "identity politics" and strict controls on immigration (such as the "travel ban" and building the border wall) have also fueled social discontent and conflict.

Trump has been described by former aides and others as an unprincipled leader, with claims that his greatest principle is "no principles." He may fail to fulfill promises in pursuit of personal goals. Furthermore, although the cryptocurrency industry tends to avoid reliance on a single individual or centralized political power, Trump's leadership style could push cryptocurrency toward a cult of personality, which contradicts the industry's decentralization principles.

The alliance between cryptocurrency and the Republican Party, primarily supporting Republican candidates and policies, may alienate liberal or progressive supporters. Certain prominent figures in the cryptocurrency industry, such as Ryan Selkis, have made publicly biased statements that may make some groups feel discriminated against, thus affecting the widespread acceptance of cryptocurrency. For groups hoping to expand support for cryptocurrency, such exclusivity may backfire.

The support for cryptocurrency from Trump may entangle the industry in policy issues unrelated to crypto during elections. For instance, Trump's positions on the Ukraine war, mass deportations, abortion, and transgender rights may not fully align with the values of the cryptocurrency industry. Supporting Trump through crypto donations could closely associate cryptocurrency with these cultural and social policies, leading to unintended negative consequences.

Paving the Way in U.S. Politics

The 2024 U.S. elections will profoundly impact the cryptocurrency market and related legislation. The outcomes of the presidential, House, and Senate elections could determine the direction of cryptocurrency regulation in the coming years. Should Donald Trump return to the White House, it may drive regulatory, executive, or legislative actions regarding cryptocurrency, particularly in areas such as market structure, stablecoins, and commodities.

Currently, several legislative avenues may advance after the elections. The divisions between Republicans and Democrats on crypto bills could lead to a legislative process filled with uncertainties in the coming months. The proposed "FIT21 Act" by Republicans may become a focal point of controversy, although its passage will depend on the power distribution after the elections. Bipartisan cooperation is seen as key to passing the bill; however, post-election divisions may force legislators to adopt more compromise-oriented solutions.

The cryptocurrency industry has invested heavily in the elections, particularly in House and Senate campaigns. Currently, the crypto industry has invested approximately $169 million in the 2024 U.S. congressional elections, achieving significant political results. Through this funding support, the crypto industry has successfully advanced key legislative processes, particularly with the defeat of Democratic Senator Sherrod Brown, who hindered cryptocurrency legislation.

This initiative helped blockchain entrepreneur Bernie Moreno replace Brown and shifted Senate control to the Republicans. The Republicans may be more inclined to promote cryptocurrency legislation, especially under the new leadership of the Senate Banking Committee, bringing more hope to the crypto industry.

Campaign funds from the crypto industry, primarily channeled through the Fairshake Political Action Committee (PAC), have supported candidates who favor crypto legislation. The PAC's funding has enabled over 30 of the 58 candidates to successfully win election, many of whom are new faces joining Congress. By supporting pro-crypto lawmakers, these PACs aim to advance cryptocurrency legislation rather than concern themselves with the candidates' other political positions.

Should Donald Trump return to the White House, he could become a powerful ally for the cryptocurrency industry. He previously promised that if elected, he would replace SEC Chairman Gary Gensler and bring policy support to the crypto industry. However, even if the presidential election results are unfavorable, the support for the crypto industry in Congress is still increasing, with over twenty new lawmakers expected to join the House in January 2025, most of whom support cryptocurrency legislation.

Will the President Bring a "Bull Market"?

However, researchers generally believe that the impact of election results on the stock market is not as significant as the influence of economic cycles.

A recent report from BMO Capital Markets' economic research analysts noted: "Looking back since 2000, the phenomena observed immediately after elections have not shown any clear positive or negative reactions."

The S&P 500 index has risen in most cases within 90 days after elections, except in 2000 (when the market was still reeling from the burst of the internet bubble) and 2008 (when the global financial crisis was fully unfolding).

Deutsche Bank's research department reached similar conclusions in analyzing the election results announced on Monday and the market's response: the macroeconomic conditions' impact on market performance post-election is as important as the election itself.

However, the 2000 showdown between George W. Bush and Al Gore provides a typical example of how the uncertainty of election results can affect the market. It was only after more than a month of legal challenges that Gore conceded to Bush. Due to the disputed results, the S&P 500 index fell 8% in November 2000, the worst-performing month of that year. As investors flocked to the safety of U.S. Treasury bonds, bond yields steadily declined after the election day.

Nevertheless, Bitget Research Institute stated that in the medium to long term, Trump's election is favorable for BTC, but his policy direction may push up inflation levels in the U.S., with medium to long-term U.S. interest rates likely remaining above 3.5%. The Republicans may sweep Congress this time, potentially promoting a favorable regulatory framework for the crypto market, which is beneficial for the crypto market in the medium to long term.

Additionally, in the derivatives market, the rise in implied volatility (IV) in the options market and a short-term increase of $900 million in open interest in the contract market indicate that traders are betting on future volatility. Furthermore, after the stablecoin market cap broke new highs, it fluctuated around $160 billion, providing significant leverage space for the market, with BTC potentially reaching $100,000 within five months.

Overall, Trump's victory may bring favorable conditions for Bitcoin, but if the Federal Reserve adopts a tightening monetary stance to counteract the economic overstimulation from Trump's policies, the upward trend may face resistance. During this pre-election period, traders looking to profit in the short term may consider using call option arbitrage strategies to manage risk and capture upside gains.

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