Posted August 23, 2024 at 10:55 am EST.
Crypto has suddenly found itself in the enviable position of being a key economic policy issue in the U.S. presidential race between Donald Trump and Kamala Harris, with Trump vowing to make bitcoin a strategic reserve asset and Harris reportedly promising to support “emerging technologies.”
Trump has led the charge by assigning Cynthia Lummis, Wyoming’s Republican Senator and the so-called “Crypto Queen,” to propose new legislation to the U.S. Senate that would greenlight the purchase of 1 million bitcoin (BTC) over 5 years.
“It will be held for a minimum of 20 years and will be held for one purpose — reducing our debt,” Lummis told a crowd of some 8,000 attendees at the 2024 Bitcoin Conference in Nashville, Tennessee last month.
Conversely, Harris, whose administration has been widely viewed as hostile to crypto, has been mostly mum on the issue. In her speech accepting the Democratic nomination on Thursday night, Harris didn’t mention crypto at all. Democratic Party leaders did recently meet with crypto company executives to ease tensions, but their efforts were largely unsuccessful. But then on Wednesday, Brian Nelson, senior campaign adviser for policy to the Harris campaign, said at a Bloomberg news roundtable that Harris would “support policies that ensure that emerging technologies and that sort of industry can continue to grow.”
Traditional polling has Harris with a 3.6 percentage point lead at 47.2% compared to Trump’s 43.6%, but predictions market Polymarket has the former President leading Harris, 51% to 48%.
Read more: The US Presidential Election Isn’t the Only Reason for Polymarket’s Success
Depending on whether Trump or Harris clinches the presidency in November, several assets are likely to garner a lion’s share of the potential investment windfalls.
Bitcoin
Bitcoin is perhaps the one digital asset best positioned to enjoy a significant price appreciation if another Trump administration is voted in. The plan to purchase a million BTC over a 5-year period works out to 200,000 bitcoin every year until 2030, assuming the plan is implemented in 2025.
Such buying pressure would almost certainly buoy the cryptocurrency’s price well above the nearly $74,000 all-time high set in May, potentially igniting an epic bull run, lifting all boats.
“It’s hard to know which assets would be more significantly affected, as there’s potential upside for pretty much all of them,” crypto researcher Noelle Acheson told Unchained. “BTC would see greater adoption from institutions.”
Read more: Bitcoin OTC Desk Balances at Two-Year High: CryptoQuant
Recent reporting by CoinDesk indicates that traders are generally bullish on bitcoin’s price around election time, with twice as many call options due for settlement four days after the Nov. 4 election than put options on bitcoin derivatives platform Deribit. Call options are leveraged bets that pay off if bitcoin’s price appreciates, while put options pay off if the price dips.
Strike prices for the call options — thresholds for profitability — are reportedly ranging from $70,000 to $140,000, with $80,000 being the most popular. This essentially means that many traders expect bitcoin to top $80,000 around election time.
MicroStrategy
Software firm MicroStrategy (MSTR) is the world’s largest corporate holder of bitcoin, boasting 226,500 BTC — about 1.1% of all available coins — currently valued at just under $14 billion.
The firm has borrowed billions to make regular purchases of the digital asset over the past four years, and has evolved into an ideal bitcoin proxy for investors who may be unable or unwilling to purchase the cryptocurrency directly.
Lummis referenced the firm’s executive chairman and founder Michael Saylor in the speech she gave after Trump’s keynote at the Bitcoin Conference, although it’s unclear if Saylor influenced the Trump campaign’s bitcoin strategic reserve plan.
Read more: Has Michael Saylor, Bitcoin Maximalist-In-Chief, Pivoted?
“As Michael Saylor said yesterday…we will eliminate the United States’ debt,” Lummis said. “We will be debt free because of bitcoin.”
South Korea’s largest pension fund — National Pension Service (NPS) — an entity with almost $780 billion in assets, recently purchased $34 million in MSTR shares, showcasing MicroStrategy’s appeal as a proxy for bitcoin.
Mike Butler, an options trader with financial network Tasty Live, noted that MSTR shares would be one of the assets that would benefit in the election aftermath, especially if Trump wins.
“Their whole business model has shifted to acquiring as much bitcoin as possible, so the stock moves at an accelerated rate relative to bitcoin gains and losses,” Butler told Unchained, meaning that bitcoin’s price movements are amplified in the stock.
He further noted that MicroStrategy’s stock recently underwent a 10-for-1 split, so that shares are much more affordable now at around $133 a share.
Coinbase
Butler also mentioned Coinbase as another key beneficiary of a second Trump administration.
The cryptocurrency exchange raked in $1.4 billion in its second quarter according to its Q2 financials released at the beginning of August. It owns 9,000 BTC, making it the fifth-largest corporate holder of bitcoin.
“Coinbase is the most popular exchange for sure, and they also hold bitcoin themselves,” Butler said.
In the company’s Q2 shareholder letter, the company placed much emphasis on “achieving regulatory clarity.”
“We have seen crypto legislation become a mainstream issue, garnering bipartisan support,” the letter said. “There is real energy within both the House and the Senate to pass meaningful legislation.”
Read more: Coinbase Teases Wrapped Bitcoin Alternative ‘cbBTC’
So far, the Republicans have been the only ones outlining specific regulatory proposals, but researcher Acheson said the lack of specifics from the Democrats could just be a result of standard bureaucracy.
The Democratic Party released its official party platform several days ago, but it contained nothing crypto-related. However, the platform appears to have been drafted before President Joe Biden’s withdrawal from the race since it includes references to him as the candidate.
Acheson said the absence of crypto-related policy right now doesn’t mean it won’t be forthcoming in the future.
“If it’s too hard to get an obviously necessary name change approved by the pyramid of committees and long river of sign-offs, imagine how hard it would be to insert potentially controversial new language,” Acheson said.
She also suggested that companies that are heavily impacted by regulation like Coinbase could enjoy a friendlier environment regardless of which candidate wins the election.
“Bottom line, Republicans would be better for crypto, given the candidate support and also their pro-business, pro-innovation stance on many issues,” Acheson explained. “But there’s also upside ahead in terms of less regulatory hostility if the Democrats win.”
ETH, Stablecoins, and CBDCs
According to a July 27 article by derivatives firm CME Group, over a two-year period, bitcoin’s daily price movements explained 75% of ether’s daily price movements.
The company calculated that for every 1% move by BTC, ETH would, on average, move by a corresponding 1.105%.
In other words, a bull market for bitcoin also means a bull market for ether, and potentially, other cryptocurrencies.
Stablecoins would also be better off given Trump’s promise to create an effective stablecoin framework.
“As one of our efforts to provide regulatory clarity, we will create a framework to enable the safe, responsible expansion of stablecoins,” Trump said during his Bitcoin Conference keynote speech.
Since U.S. dollar denominated stablecoins like USDC are typically backed by cash (USD), the reason for such a framework, according to Trump, would be to reinforce the greenback’s waning global relevance and dominance by expanding USD-backed stablecoins “to new frontiers all around the world.”
One idea explicitly denounced by the Trump campaign is the concept of a central bank digital currency (CBDC). CBDCs are widely shunned in the industry because they can act as tools for government surveillance. In January, Trump reportedly told a New Hampshire crowd that CBDCs are a “dangerous threat to freedom.”
“There will never be a CBDC while I’m President of the United States,” Trump emphasized.
This is bad news for initiatives such as MIT’s OpenCBDC project and its investors.
Will Harris Pull a Rabbit Out of Her Hat?
Many have lamented the conspicuous silence from the Harris campaign about its plans for the crypto sector since, among other things, it prevents investors from making educated investment decisions.
“While former President Trump has been very vocal about his support for bitcoin and the crypto industry, Vice President Harris has not taken a public position,” said Pedro Lapenta, head of research at crypto ETF firm Hashdex. “It’s clear [Trump] is more likely to have an administration that prioritizes the development and advancement of this industry.”
One asset that will most likely continue to be a safe investment bet if Harris becomes President is bitcoin. Securities and Exchange Commission (SEC) Chairman Gary Gensler has publicly stated that “everything else other than bitcoin is a security.”
For the risk-averse investor, then, BTC and any of the eleven spot bitcoin exchange traded funds (ETFs) would be good bets.
Ether is another asset that will probably continue to thrive under a Harris administration. On June 18, the SEC closed its investigation into Ethereum 2.0 after being sued by Consensys, a key Ethereum ecosystem firm. The investigation could have potentially resulted in ether being classified as a security, according to a post by Consensys.
Read more: Crypto Execs Complain About Getting Unbanked in Meeting With Top Democratic Officials
The SEC subsequently approved multiple spot ether ETFs in July, further strengthening the legitimacy of ether as a commodity rather than a security. Much like bitcoin, spot ether as well as ether ETFs would be relatively safe bets if Harris becomes President, even if Gensler continues as SEC chairman.
“Ether is now not a security,” Acheson explained. “But many of the developers building apps on top need more assurance they won’t be prosecuted for violating securities laws,” she added.
Investment decisions on crypto assets apart from bitcoin and ether will be hard to make without any indication of how a Harris administration will handle policy for the sector.
During her keynote speech at the Democratic National Convention, Harris discussed general plans for the economy, but did not specify anything about crypto.
“We will create what I call an opportunity economy,” Harris said. “An opportunity economy where everyone has the chance to compete.”
It could be that Harris will continue to tiptoe around the issue, but it could also be the case that her campaign is crafting something comparable to the Trump proposal and simply waiting for the right time to reveal it.
“It’s smart for Harris to wait until after the convention to say anything about crypto,” said Acheson. “Until the convention vote, her nomination was not a 100% sure thing, and why risk rocking the boat with influential party members until it’s a done deal?”
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