What's next for the crypto industry after Trump wins the election?

By James Hunt

Translation: Blockchain in Vernacular

As the results of the US presidential election are settled, what changes will the cryptocurrency industry see next after Donald Trump's victory?

In this year's campaign, Trump showed a new pro-cryptocurrency stance and made crypto policy an important issue for the first time, making a series of promises. His promises include firing Securities and Exchange Commission Chairman Gary Gensler on his first day in office, commuting the sentence of Silk Road founder Ross Ulbricht, establishing a presidential cryptocurrency advisory committee, repealing SAB 121, ending Operation Stranglehold 2.0, making the United States a Bitcoin mining "powerhouse", and establishing a national strategic Bitcoin reserve.

With the presidency, Senate and House of Representatives likely to be fully controlled by the Republicans, optimism is growing in the cryptocurrency community that these promises can be fulfilled quickly.

1. New SEC Chairman

During the Biden administration, the Securities and Exchange Commission (SEC) played a key role in cryptocurrency regulation. Current Chairman Gary Gensler argued that most cryptocurrencies are securities and urged relevant agencies to register under existing regulations. The agency has also fought multiple legal battles with major industry players such as Coinbase, BN, Kraken, and Robinhood, as well as DeFi, NFT, and stablecoin projects.

Although Gensler may choose to continue serving as an SEC commissioner in the Trump administration, there are reports that he is likely to choose to resign.

As for who will take over the chairmanship, it is widely speculated that Trump may appoint Hester Peirce, the current Republican SEC commissioner, who is known as the "Crypto Mom" for her supportive attitude in the field of cryptocurrency. Peirce has long criticized the SEC's enforcement actions in the field and its practice of not approving spot cryptocurrency trading products before being prosecuted. However, Peirce previously stated that she was not interested in the chairmanship, which makes the only other Republican commissioner Mark Uyeda a popular candidate, who is also friendly to cryptocurrency. On the other hand, Trump may also nominate a new commissioner, and some analysts pointed out that former CFTC Chairman Chris Giancarlo is a candidate being considered.

Jake Chervinsky, chief legal officer of Variant Fund, said Peirce's chances of becoming chair are low because she doesn't seem to want the position. He believes: "Uyeda has a good chance of taking the position, but I expect Trump may be more inclined to appoint a new person of his choice." He added: "In reality, being chair is a very difficult and thankless position. Some commissioners (such as Uyeda) may be interested, but others may feel that they have fulfilled their duties and want to pursue new opportunities."

However, with two and a half months until Trump officially takes office, encryption policy may change before new leadership takes over federal agencies. Chervinsky warned that in the meantime, the current administration may be "busy finalizing rules and launching enforcement actions."

He said: “Trump’s first crypto policy priority must be to end Biden’s attempts to crush the industry through law enforcement. This means rescinding the SEC’s unreasonable enforcement actions and the Department of Justice’s prosecution of Tornado Cash.”

2. Pro-crypto regulation

Under the Trump administration, the promotion of the Bitcoin Act has become one of the most anticipated policies, which is to establish Bitcoin as a strategic reserve asset and plan for the US government to hold up to 5% of the total supply of Bitcoin (21 million). The official name of this bill is the "Promoting Innovation, Technology, and Competitiveness through National Optimization Investment Act of 2024", referred to as the "Bitcoin Act of 2024", which was proposed by Republican Senator Cynthia Lummis of Wyoming in July this year.

After the election results were announced, Donald Trump won the presidential election, the Republicans regained control of the Senate and are expected to continue to control the House of Representatives. Lummis posted on the X platform: "We will build a strategic Bitcoin reserve."

“If Republicans achieve full control of the presidency, Senate, and House of Representatives, the chances of many crypto-related bills passing Congress, including Lummis’ Bitcoin Strategic Reserve Act, will greatly increase,” explained Presto analysts Peter Chung and Min Jung.

At the 2024 Bitcoin Conference in Nashville this summer, Ikigai's chief investment officer Travis Kling said he thought the plan was unlikely to come to fruition. "It sounds like an unbridgeable chasm, almost too optimistic to be true. But with a strong Republican victory, the likelihood of this plan has increased dramatically. If it does happen, we will really win together (WAGMI, meaning 'we will all succeed')."

James Butterfill, head of research at CoinShares, wrote on Wednesday that the move would give Bitcoin a status similar to gold, making it part of national reserves and marking a historic step toward legalization. He said: "If the Bitcoin Act is implemented, it could greatly stimulate institutional and government interest in Bitcoin, accelerate its growth, and drive its value to new highs."

According to analysts at research and brokerage firm Bernstein, Trump's victory has turned the regulatory environment for cryptocurrencies from a headwind to a tailwind, and the Senate Banking Committee is expected to be more pro-cryptocurrency. This means that other crypto legislation will move faster, especially in the stablecoin and market structure bills, which will benefit U.S. trading platforms and stablecoin issuers such as Circle and Paxos.

Matt Hougan, chief investment officer at Bitwise, pointed out that among Trump's other policy promises, the end of "Stranglehold 2.0" will relax restrictions on cryptocurrency access to the traditional banking system. In addition, the repeal of the controversial SEC announcement SAB 121 may pave the way for traditional banks to accept more crypto companies as customers and enable them to hold and custody Bitcoin themselves.

However, one constant after the election is the US deficit of $36 trillion, which is increasing by $1 trillion every 100 days. Hougan pointed out that according to the Congressional Budget Office's forecast, this trend may continue or even worsen under Trump's policies. With the Federal Reserve likely to cut interest rates and the uncertain economic environment, Bitcoin will become a "must-have" asset for investors.

3. Bitcoin mining incentives and release Ross Ulbricht (founder of the dark web market Silk Road)

Incentives for U.S. Bitcoin miners could further expand the current dominance and consolidation trend of domestic listed operators. This situation could affect the industry's current diversification into AI data center hosting in a difficult post-halving environment.

Finally, perhaps one of Trump’s most popular promises, both within the crypto community and more broadly, is to release Ross Ulbricht after his inauguration. Ulbricht is serving a life sentence without parole for creating and operating the darknet marketplace Silk Road, a site closely associated with the early history of Bitcoin.

Amir Taaki, an early Bitcoin player, quickly reminded President-elect Trump on Wednesday to fulfill his promise to commute Ulbricht's sentence and urged his release as soon as possible. Taaki said: "I owe Ross Ulbricht everything. Cryptocurrency has changed my life. Cryptocurrency is only possible because of his contribution. He made the ultimate sacrifice, and we all benefit from his work."

4. Market Impact

CoinShares' Butterfill noted that Trump's proposal to appoint billionaire backer Elon Musk to lead a new "Ministry of Government Efficiency" responsible for cutting about $2 trillion in federal spending means that more accommodative monetary policy may be adopted in the future to balance this plan. He said that historically, loose monetary policy and fiscal conservatism have favored Bitcoin, enhancing its appeal as a hedge against currency depreciation and inflation, attracting investors seeking to avoid traditional economic risks.

BRN analyst Valentin Fournier said: "Trump's election provides a strong bullish reason for the market. It is expected that the upcoming interest rate cuts and global stimulus measures will further boost the economy and support Bitcoin's performance. Although Trump will not officially take office until January next year, we expect Bitcoin to remain strong 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 its previous poor performance. However, we believe that this wave of gains is temporary and Bitcoin may continue to lead in the next few weeks."

According to The Block's price page, Bitcoin is currently trading at $74,967, up 1.7% in the past 24 hours and up 77.4% year-to-date. In contrast, Ethereum is currently trading at $2,818, up 7.6% in the past 24 hours. However, Ethereum's year-to-date gain of 23.7% has underperformed other crypto assets.

Ryan Lee, chief analyst at Bitget Research, said: "With Trump's re-election as president, the initial market reaction may be that off-market funds enter the market out of fear, pushing Bitcoin prices to new highs. In the next few days, BTC ETFs may see net inflows, which shows that Wall Street institutions are optimistic about the market outlook. The long-short ratio in the futures market is below 1, which means that institutional investors in the crypto market are taking long positions through futures. The market is currently in a unanimous bullish phase."

Bernstein analysts reiterated their forecast on Wednesday, predicting that Bitcoin will approach $90,000 by the end of this year and reach a bull market target of $200,000 by 2025. Bitwise’s Hougan has a similar forecast target.