Donald Trump's decisive victory in last week's presidential election sparked the so-called “Trump trade” around the world and shocked financial markets. The dollar rose the most in years, bonds fell, the stock market soared, and gold fell.
And then there's Bitcoin, whose price soared above $90,000 this week, giving it a market capitalization of $1.5 trillion, more than the market cap of all but the world's largest companies.
Benjamin Graham, the father of value investing, once said that the market is a voting machine in the short term and a weighing machine in the long term. Investors appear to be voting with their feet and dollars, driving up the value of a wide range of assets.
But it will take months, if not years, to consider President Trump's true impact on the many industries and asset classes that reacted rapidly to his reelection.
And while we can't prove a counterfactual, it's unlikely that the market would have reacted quite as positively had Harris been elected.
Trump's biggest trade winners have been Web3, the blockchain-enabled internet, and assets such as Bitcoin, Ethereum, and Solana.
Web3 supporters and investors have high hopes for what the Trump administration will bring. Amount of tillage record to these assets.
On November 7th, investors poured $1.4 billion into Bitcoin ETFs, followed by another $1.1 billion on November 11th.
Interestingly, Biden's election victory in 2020 also triggered a rally in Bitcoin, with the price soaring 149% from November 5, 2020 to Inauguration Day the following January.
At the time, there was optimism that the new administration would bring a fresh start to the crypto industry. As of November 14, Bitcoin is up 33% since Trump's reelection.
It seems like the animal spirits have been released again. Consider Dogecoin (DOGE), a memecoin, a digital asset based on irreverent internet culture. Dogecoin has increased in value by more than 70% in just one week and now has a market value greater than Ford Motor Company.
Why is the industry so excited? First, it argues that nothing is better than the Biden administration, which has been openly hostile to the Web3 industry.
Second, Trump's presidency is seen as being good for business, and the market is unhindered from innovation.
Third, there is much that governments can do to actively encourage innovation and investment by setting clear rules of the road. There are growing hopes that the cryptocurrency industry will finally achieve regulatory clarity under President Trump.
Brandon Potts, a partner at Framework Ventures, a Web3 venture capital firm, recently said, “Everything we've done so far in relation to U.S. cryptocurrencies has been operating in a gray area.”
What he means is that today there is uncertainty about the very nature of crypto assets. In other words, are crypto assets securities, products, or something else entirely?
Many large companies are concerned about innovating in this area for fear of accidentally falling victim to an SEC warning that could haunt them for years to come.
Clear regulations would keep American founders in the United States, accelerate corporate hiring, and encourage institutional investors to invest.
Bitcoin is skyrocketing, and many companies operating in this space, such as Coinbase and Hut8, are doing well. This makes sense, given that the market is currently pricing in government regulation as a headwind and government support as a tailwind.
Memecoins are outperforming, with Dogecoin (DOGE), Pepe (PEPE), Dogwifat (WIF), and Shiba Inu (SHIB) handily outperforming Bitcoin.
Dogecoin received another boost after President Trump announced the creation of the Department of Government Efficiency (also known as DOGE), which will be co-headed by former presidential candidate Vivek Ramaswamy and Dogecoin's big promoter Elon Musk. .
Search results for DOGE on Google spiked by more than 700% following President Trump's announcement, and the crypto community celebrated this as a victory.
It was inconceivable until recently that Trump has become the talisman of the crypto industry, naming government departments after internet meme coins. Back in 2020, during his first turn in the White House, Trump reportedly wanted to ban bitcoin.
What has changed this year?
President Trump's pivot to cryptocurrencies may have started earlier, but it took shape at the Bitcoin 2024 conference, hosted by industry leader BTC INC., held in Nashville on July 27 of this year.
Robert F. Kennedy, Chairman Cantor Fitzgerald, Trump transition manager Howard Lutnick, and U.S. Sens. Cynthia Lummis, Bill Hagerty and Marcia Blackburn rounded out the lineup.
within timeThis is a speech to a standing room only audience.Trump extolled the virtues of cryptocurrencies, said he intended to make the United States “the crypto asset of the planet,” and announced the creation of a strategic Bitcoin reserve.
After taking office, he said he would fire SEC Chairman Gary Gensler, who is unpopular in the industry. “We're going to have regulations, but the rules going forward will be written by people who love your industry, not hate your industry.” he added.
By offering support for the cryptocurrency industry, Trump is luring potential donors and showing he will protect their businesses, lives, and investment portfolios, making his way into voters focused on cryptocurrencies. It was calculated that this could provide motivation for change.
This election cycle, the cryptocurrency industry spent $160 million on campaign funds, making it one of the largest contributors.
But it wasn't just wealthy donors who were throwing the financial weight around. It is clear that many voters were deeply concerned about this issue. According to a recent Coinbase study, 25% of Millennials and Gen Z own cryptocurrencies, and nearly 2 million people own cryptocurrencies. Signed a pledge to support pro-cryptocurrency candidates.
President Trump has found a group of disaffected people who feel alienated from the status quo and who own the problem. By the time Harris extended his olive branch, cryptocurrencies had become the cornerstone of a society in a strange place. Her appeal to black men In late October, it felt too late to change many people's minds.
Cryptocurrency donors didn’t just influence presidential elections. They also targeted parliamentary elections.
The website Standwithcrypto.org shows how successful this strategy has been. In 2024, voters will elect 257 pro-crypto candidates to the House of Representatives against 115 anti-crypto candidates, and 16 pro-crypto senators to 12 anti-crypto senators. added to.
Significantly in the eyes of industry insiders, Ohio State Sen. and anti-crypto activist Sherrod Brown lost to Republican Bernie Moreno, who mobilized pro-crypto votes. “The clear message is that cryptocurrencies have won,” Potts said.
So what can we expect from the new administration? Trump is likely to clean up most federal agencies, including the Securities and Exchange Commission, where he has vowed to replace the current chairman.
Supporters hope that under new leadership, more crypto exchange-traded funds (ETFs) will be approved and more crypto-native companies will be allowed to list on U.S. exchanges. There is.
This will bring more retail and institutional investors into the crypto market and provide industry-leading companies with access to growth capital.
Under the new administration, there is a good chance that the SEC will drop its case against Coinbase for operating a stock exchange without a license. This will set a precedent for other companies wishing to enter the US market.
With clear rules of the road, banks and other traditional players will enter the cryptocurrency space, allowing for the growth of stablecoins (cryptocurrencies pegged to other more traditional assets) and other financial applications. may accelerate.
Some hope that Trump may even establish a strategic Bitcoin reserve and eliminate taxes on many small-value crypto transactions, making it easier to use these assets for everyday transactions.
Certainly, there is much that governments can do to accelerate and enable innovation. And much of that will depend on Trump and his pro-crypto allies in Congress and the industry focusing on difficult issues and working to draft and pass legislation.
People who have worked closely with President Trump say he is notoriously volatile and easily swayed on many issues. Will he continue to take an interest in web3 and appoint people who can enact this agenda?
The recent appointment of cryptocurrency believers Musk and Ramaswamy to head DOGE should encourage many. Between now and January 21st, the industry will likely get more evidence one way or another. For over a decade, web3 has operated in a gray area. Now is the time to step into the light.
Alex Tapscott is the author of Web3: Charting the Internet's Next Economy and Culture Frontier and managing director of Digital Asset Group, a division of Ninepoint Partners LP.
