Donald Trump’s decisive victory in last week’s presidential election has sent shockwaves through financial markets because of the so-called “Trump trade” that has gone global. The dollar gained the most in years, bonds fell, the stock market rose and gold fell.
Then there’s Bitcoin, which topped $90,000 this week, with a market cap of $1.5 trillion surpassing 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 run and a weighing machine in the long run. It appears investors are voting with their feet and dollars, sending various assets higher.
But it will take months — if not years — to weigh the true impact of a Trump presidency on the many industries and asset classes that are quickly reacting to his re-election. And when you can’t prove the counterfactual, it is believed that the market will have reacted in quite a positive way if Harris had been elected.
The biggest winners from Trump’s trade have been Web3, the blockchain-enabled internet, and assets like Bitcoin, Ethereum, and Solana.
Web3’s supporters and investors have high hopes for what the Trump administration can do and are pouring money into the asset.
On November 7th, investors put $1.4 billion into the Bitcoin ETF, followed by another $1.1 billion on November 11th. Interestingly, Biden’s election victory in 2020 also led to a rally in Bitcoin, with the price increasing by 149% from November 5, 2020, to the inauguration day of the following January.
At the time, there was optimism that the new administration would give the crypto industry a fresh start. As of November 14, Bitcoin is up 33% since Trump’s re-election.
It seems that once again the spirit of the animal has been released. Consider Dogecoin (DOGE), a memecoin – or digital asset based on some sleazy internet culture – which has risen more than 70% in just one week, and now has a market value greater than that of Ford Motor Company.
Why is the industry expecting so much? First, he argues that there is nothing better than the Biden administration, which is openly against the web3 industry.
Second, the Trump presidency is considered more business-friendly, leaving the market to innovate undisturbed.
Third, there is much the government can do to actively encourage innovation and investment by setting clear rules on the road; now there is hope that the crypto industry will finally gain regulatory clarity under the Trump presidency.
Brandon Potts, a partner at Framework Ventures, a web3 venture capital firm, recently said that “everything we’ve done so far has operated in a gray area as it relates to crypto in the United States.”
What this means is that there is now uncertainty about the nature of cryptoassets: Are they securities, commodities, or something else?
Many large companies are wary of innovating in this space for fear of accidentally hitting an SEC tripwire that could entangle them for years.
Regulatory clarity will encourage American founders to stay in America, initiate corporate adoption, and drive institutional investment.
Bitcoin has surged, and many companies that operate in places like Coinbase and Hut8 have fared as well, which makes sense if you consider the current market price in the shift from government regulations as a headwind to government support as a tailwind.
Memecoin has taken the lead, with Dogecoin (DOGE), Pepe (PEPE), dogwifhat (WIF), and Shiba Inu (SHIB) beating Bitcoin handily.
Dogecoin got an additional boost when Trump announced the creation of the Department of Government Efficiency (aka DOGE), which will be led by former presidential candidate Vivek Ramaswamy and Elon Musk, who have been big Dogecoin boosters.
Google search results for DOGE increased by more than 700% after Trump’s announcement, and the cryptocurrency community celebrated this as a win.
Trump’s rise to talisman of the crypto industry, and the naming of government departments after internet memecoins, was impossible until now. Back in 2020, during his first turn in the White House, Trump reportedly wanted to ban Bitcoin.
How it has changed this year.
Trump’s crypto conversion may have started earlier, but it crystallized at the Bitcoin 2024 conference in Nashville, hosted by industry leader BTC INC on July 27 of this year.
Robert F. Kennedy, Chairman of Cantor Fitzgerald, and Trump’s transition boss Howard Lutnick, as well as US Senators Cynthia Lummis, Bill Hagerty, and Marsha Blackburn rounded out the lineup.
In a speech to a standing-room-only crowd, Trump extolled the virtues of crypto, said he would make the United States the “crypto capital of the planet” and announced the creation of a strategic Bitcoin reserve.
He said that when he took office, he would remove Gary Gensler, the SEC chairman who was unpopular with the industry. “We will have regulations, but from now on those regulations will be written by people who love your industry, not hate your industry,” he said.
Trump calculated that by offering support to the crypto industry, he could lure potential donors and motivate crypto-focused voters to run by showing he would protect businesses, livelihoods, and investment portfolios.
This election cycle, the crypto industry spent $160 million on campaign financing, making it one of the largest contributors.
But it’s not just wealthy donors throwing their financial weight around. Many voters clearly care deeply about this issue. According to a recent Coinbase survey, 25% of millennials and Gen-Z own crypto, and nearly two million have signed a pledge to support pro-crypto candidates.
Trump sees a disaffected group that feels alienated from the status quo and has a problem with it. When Harris extended his own olive branch, making crypto a strange platform to attract black people in late October, it felt like it was too late to change many minds.
Crypto donors don’t just influence presidential elections. He also targeted congressional races.
The website Standwithcrypto.org shows how valuable this strategy is. In 2024, voters elected 257 pro-crypto candidates to the house, compared to 115 anti-crypto candidates, and added 16 pro-crypto senators, to 12 anti-crypto senators.
Importantly, in the eyes of industry insiders, Ohio senator and anti-crypto crusader Sherrod Brown was defeated by Republican Bernie Moreno who has considered the crypto vote. As Potts said, “The clear message is that crypto is winning.”
So what can we expect from the new administration? Trump is likely to clean house at most federal agencies, including the Securities and Exchange Commission, where he has promised to replace the current chairman.
Under the new leadership, supporters hope, more crypto-asset exchange-traded funds (ETFs) can be approved and more crypto-native businesses can be allowed to go public on US exchanges.
This will bring additional retail and institutional investors into the crypto market and provide access to growth capital for the industry’s leading businesses.
Under the new administration, the SEC may drop a lawsuit against Coinbase alleging that the company operates an unlicensed brokerage exchange. This will then set a precedent for other companies looking to enter the US market.
Clear rules of the road could bring banks and other traditional players into the crypto arena, accelerating the growth of stablecoins (cryptocurrencies pegged to other, more traditional assets) and other financial applications.
Trump could even create a strategic Bitcoin reserve, some hope, and eliminate taxes on many small dollar crypto asset transactions, making it easier to use these assets for everyday transactions.
Of course, there is much that governments can do to accelerate and enable innovation. And much depends on Trump and his pro-crypto allies in Congress and industry focusing on the tough issues and doing the work to get legislation passed.
People who have worked with Trump have said he is notoriously easy-going on many issues. Will they remain interested in web3 and vote for someone who can implement this agenda?
The recent appointment of Musk and Ramaswamy, both crypto devotees, to lead DOGE should encourage many. Between now and January 21, the industry will get more evidence one way or another. For a decade or more, web3 has operated in a gray area. Now it’s time to go to the light.
Alex Tapscott is the author of “Web3: Charting the Next Economic and Cultural Frontier” and managing director of Digital Asset Group, a division of Ninepoint Partners LP
