Author: Frederick Munawa Source: unchainedcrypto Translation: Shan Ouba, Jinse Finance
Cryptocurrencies are suddenly in the enviable position of becoming a key economic policy issue in the U.S. presidential campaign between Donald Trump and Kamala Harris, with Trump vowing to build Bitcoin into a strategic reserve asset and Harris pledging support for “emerging technologies.”
Trump took the lead in appointing Republican Senator Cynthia Lummis of Wyoming, the so-called "Crypto Queen", to propose a new bill to the U.S. Senate to approve the purchase of 1 million Bitcoin (BTC) within 5 years.
“It will last at least 20 years and it will have one purpose — to reduce our debt,” Loomis told about 8,000 attendees at the Bitcoin 2024 conference in Nashville, Tennessee, last month.
Conversely, Harris' administration is widely seen as hostile to cryptocurrencies, and she has remained largely silent on the issue. Harris did not mention cryptocurrencies at all in her speech accepting the Democratic nomination Thursday night. Democratic leaders did meet with cryptocurrency company executives recently in an effort to ease tensions, but their efforts were largely unsuccessful. But on Wednesday, Brian Nelson, a senior campaign policy adviser to the Harris campaign, said at a Bloomberg News roundtable that Harris would "support policies that ensure emerging technologies and such industries can continue to grow."
Traditional polls show Harris leading Trump by 3.6 percentage points at 47.2% to 43.6%, but prediction market Polymarket shows the former president leading Harris 51% to 48%. Depending on whether Trump or Harris is elected president in November, several assets could receive the lion's share of the potential investment windfall.
Bitcoin
Bitcoin is perhaps the digital asset most likely to enjoy significant price appreciation if Trump is re-elected. Assuming the plan is implemented in 2025, the plan to buy 1 million Bitcoins over 5 years would mean buying 200,000 Bitcoins per year until 2030.
Such buying pressure would almost certainly push the cryptocurrency’s price well above its all-time high of nearly $74,000 set in May, potentially sparking an epic bull run that would benefit all stocks.
“It’s hard to know which assets will be more affected because almost all assets have potential upside,” cryptocurrency researcher Noelle Acheson told Unchained. “BTC will see more institutional adoption.”
A recent report from CoinDesk shows that traders are generally bullish on the price of Bitcoin during the election, with twice as many call options expiring four days after the election on November 4 as put options on the Bitcoin derivatives platform Deribit. Call options are a leveraged bet that pays out if the price of Bitcoin rises, while put options pay out if the price falls. The strike price (profit threshold) for call options reportedly ranges from $70,000 to $140,000, with $80,000 being the most popular. This effectively means that many traders expect Bitcoin to break $80,000 during the election.
MicroStrategy
Software company MicroStrategy (MSTR) is the world’s largest corporate holder of Bitcoin, with 226,500 BTC, or about 1.1% of all available coins, currently worth just under $14 billion.
The company has borrowed billions of dollars to regularly purchase digital assets over the past four years and has evolved into an ideal Bitcoin proxy for investors who are unable or unwilling to purchase cryptocurrencies directly.
Loomis mentioned the company’s executive chairman and founder, Michael Saylor, in a speech he gave following Trump’s Bitcoin conference keynote, though it’s unclear whether Saylor influenced the Trump campaign’s plans for a strategic reserve of bitcoin.
“As Michael Saylor said yesterday…we are going to eliminate the debt of the United States,” Loomis said. “With Bitcoin, we are going to be debt-free.”
South Korea’s largest pension fund, the National Pension Service (NPS), an entity with nearly $780 billion in assets, recently purchased $34 million worth of MSTR shares, demonstrating MicroStrategy’s appeal as a Bitcoin alternative.
Mike Butler, options trader at financial network Tasty Live, noted that MSTR stock will be one of the assets that will benefit after the election, especially if Trump wins. “Their entire business model has shifted toward acquiring as much Bitcoin as possible, so the stock moves faster relative to Bitcoin going up and down,” Butler told Unchained. This means that Bitcoin’s price fluctuations are magnified in the stock.
He further noted that MicroStrategy's stock recently underwent a 10-for-1 split, so it's now even cheaper at around $133 per share.
Coinbase
Butler also mentioned that Coinbase is another major beneficiary of the second Trump administration. The cryptocurrency exchange had revenue of $1.4 billion in the second quarter, according to its second quarter financial report released in early August. It owns 9,000 Bitcoins, making it the fifth largest Bitcoin holder.
“Coinbase is certainly the most popular exchange, and they hold Bitcoin themselves,” Butler said.
In the company's second quarter letter to shareholders, the company placed great emphasis on "achieving regulatory clarity."
“We have seen encryption legislation become a mainstream issue with bipartisan support,” the letter reads. “Both the House and the Senate have real energy to pass meaningful legislation.”
So far, only Republicans have put forward specific regulatory proposals, but researcher Acheson said the lack of concrete proposals from Democrats could just be standard bureaucratic quirks.
The Democratic Party released its official party platform a few days ago, but it does not contain any cryptocurrency-related content. However, the platform appears to have been drafted before President Joe Biden dropped out of the race, as it mentions him as a candidate.
Acheson said the lack of encryption-related policies now does not mean there won’t be any in the future.
“If an apparently necessary name change is so difficult to get approved through layers of committees and lengthy sign-offs, imagine how difficult it will be to add potentially controversial new language,” Acheson said.
She also said that companies like Coinbase that have been hit hard by regulation could enjoy a friendlier environment no matter which candidate wins the election.
“The bottom line is that the Republican Party is more favorable to the prospects of cryptocurrency given the Republican candidates’ approval ratings and their pro-business, pro-innovation stance on many issues,” Acheson explained. “But if the Democrats win, there will also be less regulatory hostility, which is also a benefit.”
ETH, Stablecoins, and CBDCs
Over a two-year period, Bitcoin’s daily price movement explained 75% of Ethereum’s daily price movement, according to a July 27 article from derivatives firm CME Group. The firm calculated that for every 1% movement in BTC, ETH moved 1.105% on average.
In other words, a bull market for Bitcoin also means a bull market for Ethereum, and possibly even for other cryptocurrencies.
Stablecoins will also benefit greatly given Trump’s promise to establish an effective stablecoin framework. “As part of our efforts to increase regulatory clarity, we will create a framework to ensure the safe and responsible expansion of stablecoins,” Trump said in his Bitcoin Conference keynote speech.
Since dollar-denominated stablecoins such as USDC are typically backed by cash (USD), Trump argued that the reason for establishing such a framework is to strengthen the dollar’s waning global relevance and dominance by expanding dollar-backed stablecoins “to new areas around the world.”
One idea that the Trump campaign has explicitly denounced is the concept of central bank digital currencies (CBDCs). CBDCs are widely rejected in the industry because they could serve as a tool for government surveillance. In January, Trump reportedly told a crowd in New Hampshire that CBDCs were a “dangerous threat to liberty.”
Trump stressed: “There will never be a CBDC during my tenure as President of the United States.”
This is bad news for initiatives like MIT’s OpenCBDC project and its investors.
Will Harris conjure up a Pokémon?
Many people lament the Harris campaign’s silence on its plans for the cryptocurrency space, as it prevents investors from making informed investment decisions. Pedro Lapenta, director of research at cryptocurrency ETF company Hashdex, said: “While former President Trump has been outspoken in his support for the Bitcoin and cryptocurrency industry, Vice President Harris has not publicly stated his position. It is clear that Trump is more likely to form an administration that prioritizes the development and advancement of this industry.”
If Harris is elected president, Bitcoin will likely continue to be a safe investment option. Gary Gensler, chairman of the Securities and Exchange Commission (SEC), has publicly stated that "everything except Bitcoin is a security."
Therefore, for risk-averse investors, BTC and any of the 11 spot Bitcoin exchange-traded funds (ETFs) are good options.
Ether is another asset that could 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 major company in the Ethereum ecosystem. According to a post by Consensys, the investigation could lead to Ether being classified as a security.
Subsequently, the SEC approved multiple spot Ethereum ETFs in July, further strengthening the legitimacy of Ethereum as a commodity rather than a security. Like Bitcoin, if Harris is elected president, even if Gensler continues to serve as SEC chairman, spot Ethereum and Ethereum ETFs are relatively safe choices.
“Ether is no longer a security now,” Acheson explained. “But the many developers who build applications on it need more assurance that they won’t be sued for violating securities laws,” she added.
Without knowing how the Harris administration will approach policy in this area, investment decisions in crypto assets other than Bitcoin and Ethereum will be difficult to make.
During her keynote address at the Democratic National Convention, Harris discussed her general plans for the economy but did not address cryptocurrencies specifically.
"We're going to create what I call an opportunity economy," Harris said. "It's an opportunity economy where everybody has a chance to compete."
Harris may continue to carefully avoid the issue, but it is also possible that her campaign team is brewing proposals similar to Trump's and is just waiting for the right time to reveal them.
“Harris was wise to wait until after the convention to talk about cryptocurrencies,” Acheson said. “Her nomination wasn’t 100% certain until the convention vote, and why risk running afoul of influential party members until the dust settles?”
