It’s Morning in America for Crypto
With a decisive electoral sweep of the presidency and Congress, Trump’s second term could mark a transformative era for bitcoin, crypto, and the broader blockchain industry.
This editorial is from last week’s edition of the Week in Review newsletter. Subscribe to the weekly newsletter to get the editorial the second it’s finished.
Trump’s Victory Could Be Crypto’s Mainstream Break out Moment
This U.S. election cycle was a huge win for crypto, not just in the headline Presidential race, but also in the Congressional ones.
Mapping out all of the reasons for Trump’s unambiguous, modern day landslide victory and the Republican sweep of both chambers of Congress is really a job for people who focus on politics. I do believe that a non-trivial factor was due to the Democratic party and Biden-Harris administration’s overall hostility towards the crypto industry.
According to Standwithcrypto.com not a single new anti-crypto congressperson was elected. This next Congress will be the most pro-crypto ever, with 266 pro-crypto House candidates elected, and 18 Senate candidates. This was in no small part due to pro-crypto super PACs. The super PAC Fairshake, along with its affiliates Protect Progress and Defend American Jobs, collectively raised about $170 million and spent approximately $135 million during this election cycle.
Prediction markets such as Polymarket and Kaishi were vindicated. Polls and pollsters once again failed to capture the tenor of the election. Nate Silver, arguably the most famous pollster, got it wrong. This X post from Nate encapsulates the wrongness of polling today.
Crypto markets pumped after Trump’s election hopes became clear. So far it seems defi coins, or as co-host Graham Stone of Token Narratives reminded me in this week’s episode, SEC coins have benefited the most from Trump’s victory. I predicted as much in my newsletter three weeks ago, in which I said:
Within crypto, I think outperformance would come from anything currently hampered by unclear regulation and antagonistic regulators. It’s safe to say that defi will receive a lot of positive attention, seeing how Trump’s new crypto venture World Liberty Finance is described as a, ‘defi money market platform.’
The election of Donald Trump marked a change in the trend of bitcoin and crypto. This trend change is visible in technical, regulatory, fiscal/monetary, and macro.
From a technical perspective, bitcoin has been range-bound since March of this year. This eight-month-long range was broken on Nov. 5. Usually, the longer an asset is range-bound, the longer and stronger the breakout, indicating this is the very beginning of a long upward trend. Of course, this doesn’t mean there won’t be pullbacks.
The regulatory trend change is self-evident for anyone who has paid attention to all of the attacks from regulators this year. Trump said he would fire Gary Gensler. In his place, I’m sure he will choose a pro-crypto candidate like Hester Peirce, a choice Coinbase SEO Brian Armstrong supports. The SEC’s outstanding lawsuits and enforcement actions could be wound down. The current lack of crypto clarity, a clear set of rules of the road, should be elucidated in this new regime.
Trump brings a shift in fiscal policy while the Fed’s easing policy continues. The easing cycle should continue under Trump, at least for now. In general, the Fed is loath to suddenly deviate from telegraphed policy.
A Trump presidency is likely to be more fiscally accommodative than Harris’. Accommodative fiscal policy is a fancy way of saying increased government spending and/or reduced taxes.
The last factor is macro. Larger deficits from increased government spending will weaken the dollar. More spending combined with Trump’s proposed tariffs is likely to be inflationary, but I believe Trump and his team will be very sensitive to increased inflation since exit polls suggest inflation was one of the factors that helped Trump win in such a decisive fashion. Moderate inflation can be good for stores of values and/or risk assets such as bitcoin and crypto.
Despite many Americans, perhaps most, feeling like the economy isn’t doing well, on paper it is. Growth is between two and three percent, unemployment is at multi-decade lows. Into this, the Fed is easing and now Trump is going to stimulate further through increased spending and tax cuts. To borrow a phrase from Bob Elliot, all of this is like adding rocket fuel to an already hot economy.
