The Current State of the Bitcoin Market on the Eve of the US Election
I. The Trump Family's Cryptocurrency Project
(I) Project Launch and Fundraising Challenges
Recently, the Trump family's decentralized finance (DeFi) project, World Liberty Financial (WLF), has officially launched. Previously, the project had undergone nearly two months of promotional pre-heating, with members of the Trump family frequently promoting it in an attempt to attract investors through Trump's influence. However, the token sales of the project have not been ideal.
According to the official website, the price of one WLFI token is $0.015, and it can be purchased using ETH, USDT, USDC or WETH. On-chain data shows that in the first hour of the public sale, about 344 million WLFI tokens were sold to approximately 3,000 independent wallets.
However, so far, the total sales volume of WLFI tokens is less than 1 billion, accounting for less than 5% of the 20 billion tokens offered for public sale, far below the $300 million fundraising target. For example, according to a report by FX168 Financial News, Trump's WLFI tokens sold only about 4% of the tokens in the public sale, equivalent to $12.45 million, far from the $300 million target.
The reasons for the poor performance of the token sales include website technical failures, investment thresholds, and the not-yet-fully-disclosed business plan. The token sales of this project follow Regulation D, which limits the sales scale and sells only to accredited investors, and the tokens are not allowed to be resold, which is also one of the reasons for the poor token sales.
(II) Controversy over the Nature of the Project
Many industry experts believe that this project is actually a means for Trump to expand his campaign fundraising channels. According to the official documents of the project, the Trump family has authorized the use of its image for the promotion of WLF and is entitled to 75% of the net income of the project.
After deducting operating expenses and an initial reserve of $30 million, 75% of the remaining net income will belong to DT Marks DEFI LLC, a company under the Trump family, and the Trump family does not need to bear any responsibility for WLF. In addition to the net income, the Trump family will also receive 22.5 billion WLFI tokens, which are worth about $337.5 million at the issue price.
This high proportion of profit distribution may involve conflicts of interest, as the relationship between Trump's business interests and political power as a presidential candidate is closely scrutinized. In the context of the crypto market being heavily criticized for its lack of transparency, if it involves foreign forces, it may have a significant impact on Trump's campaign.
In addition, the restrictive measures on the token sales may involve securities law issues. WLF emphasizes that the WLFI token sales are limited to US accredited investors or non-residents to avoid violating US securities laws. However, these restrictive measures have also raised market doubts about the legality of the project.
II. The Impact of the Election on the Crypto Market Trend
(I) The Impact of Candidates' Policy Positions
Mr. Trump has touted himself as the "Crypto President" and publicly promised to make the US the "Global Crypto Capital", expressing a positive attitude towards the cryptocurrency market. This stance has attracted the attention of some investors, who expect that Trump's policies may promote the development of the cryptocurrency market and bring more opportunities to the industry.
For example, Bill Zanker, the founder of The Learning Annex, proposed to Trump the idea of converting his cartoon artworks into Non-Fungible Tokens (NFTs) for sale, which sparked Trump's interest in cryptocurrencies.
Trump also became the first US presidential candidate to accept cryptocurrency donations, with twin brothers Cameron Winklevoss and Tyler Winklevoss, who became billionaires through Bitcoin investments, pledging to donate $1 million worth of Bitcoin to Trump's campaign. Elon Musk, the CEO of Tesla and a supporter of Dogecoin, has also joined Trump's cryptocurrency advisory team.
Although Harris is not as direct as Trump on the crypto stance, she has also promised to support the establishment of a crypto regulatory framework. Harris's plan aims to ensure that digital asset owners can benefit from a reasonable regulatory framework and protect African American men and other groups participating in this market.
This commitment has boosted investor optimism, and Bitcoin prices have risen to their highest level in two weeks. However, there are also views that Harris's cryptocurrency policy is not as good as Trump's.
Noelle Acheson, the author of the "Crypto is Macro Now" newsletter, said, "This rise is mainly driven by the election, initially due to Trump's lead in prediction markets and polls, and later due to the semi-supportive statements on the crypto market from Harris's campaign team."
Galaxy Research also pointed out that Harris's attitude towards cryptocurrencies is more friendly than the current President Joe Biden, but still lags far behind her competitor Donald Trump's attitude towards the cryptocurrency industry.
(II) Monetary Policy and Market Reaction
During the US election, the adjustment of monetary policy is closely related to the crypto market. The Federal Reserve's interest rate policy and monetary easing measures are usually important issues in the election, and these policies are closely linked to the crypto market.
Cryptocurrency asset prices, especially Bitcoin and Ethereum, usually benefit from loose monetary policy, as low interest rates and a relaxed credit environment attract more capital to flow into risky assets. If the election result suggests that the new administration may adopt more monetary stimulus policies or continue the trend of interest rate cuts, it may further increase the investment demand in the crypto market.
Market sentiment dominates the short-term and medium-term price fluctuations. During the campaign, investors are full of expectations for the candidates' policy positions and future regulatory trends, while also paying attention to the adjustments of macroeconomic policies. This uncertainty leads to large fluctuations in market sentiment, which in turn affects the short-term and medium-term fluctuations in cryptocurrency asset prices.
For example, during the campaigns of Trump and Harris, Bitcoin prices have experienced violent fluctuations. Data shows that the volatility of Bitcoin prices has reached as high as 20% in the past month. In the past 24 hours, the positions of nearly 50,000 traders have been forcibly liquidated, with a total value of $123 million. This shows that the volatility of market sentiment cannot be ignored for the crypto market.
III. The Impact of Regulations on the Election and Bitcoin
(I) Challenges of Anti-Money Laundering Laws
The Biden administration has not clearly stated its position on the anti-money laundering laws for Bitcoin established by the Trump administration. The anti-money laundering regulations introduced by the Trump administration towards the end of his term require financial service institutions to disclose the identity information of cryptocurrency holders, and when customers transfer virtual assets worth at least $10,000 to non-exchange custodial wallets, they must submit relevant documents to the Treasury Department;
At the same time, banks and exchanges need to keep records of customers who send virtual assets worth $3,000 or more to non-custodial wallets. The purpose of these regulations is to curb the use of cryptocurrencies for illegal fund transfers.
However, these regulations have faced strong opposition. Heavyweight institutions, including Fidelity Investments and the U.S. Chamber of Commerce, are actively lobbying to prevent the implementation of the new regulations. Republican lawmakers such as Cynthia Lummis, Tom Cotton, and Tulsi Gabbard have also expressed opposition. Trade groups supporting cryptocurrencies have even threatened legal action.
If the next administration decides to continue to push these regulations, it could have a significant impact on the Bitcoin market. The cost of crypto services may rise, and some cryptocurrencies may even face the risk of disappearing. According to Bloomberg, this could lead to a significant drop in cryptocurrency prices.
(II) Advancement of the Digital Asset Bill
On the eve of the 2024 presidential election, the "Digital Asset Market Structure Act" regarding digital currencies has attracted widespread attention. The draft of this bill contains several key issues, and given the intensifying partisan divide as the election approaches, the passage of the bill will become increasingly difficult, making it particularly important to complete the legislative work before the election.
The draft of this bill is divided into four main parts:
1. Defining various important definitions, and the requirement for the SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission) to jointly develop rules and a temporary registration system.
2. Exemption provisions for digital assets: If digital assets meet certain conditions, they can be exempted from the current securities laws, providing a buffer period for issuers to develop their projects. At the same time, a new disclosure mechanism will be established, and issuers can also apply for decentralized certification, increasing the likelihood of being classified as commodities.
3. Registration requirements for digital asset intermediaries with the SEC and CFTC: Payment-type stablecoins and commodity-type digital assets do not need to be registered with the SEC, while the CFTC will gain regulatory authority over the spot market for digital commodities, such as Bitcoin and Ethereum, and trading platforms will need to register with the CFTC and SEC.
4. Both the SEC and CFTC need to establish new branches to support technological innovation: The SEC will establish a Center for Financial Technology Strategy, the CFTC will establish the CFTC Lab, and the two will jointly establish a Digital Asset Advisory Committee.
Although House Representative Bernie Sanders has a reserved attitude towards digital assets, he believes that the United States needs a law on digital assets to prevent the recurrence of events similar to FTX. (FTX is one of the world's largest cryptocurrency exchanges. In November 2022, FTX was embroiled in a crisis due to asset issues, leading to its bankruptcy filing. The founder, SBF, is facing multiple charges, including financial fraud, which is considered one of the largest financial fraud cases in U.S. history.)
Sanders expressed concerns that the draft may be biased towards the CFTC and may weaken the SEC's power, and has therefore written to the SEC Chairman and U.S. Treasury Secretary Yellen to inquire about the impact of the draft and provide suggestions.
The process of passing this bill may take several months, and may even extend beyond the 2024 U.S. presidential election.
IV. Summary and Outlook
The legal impact between the U.S. election and the form of Bitcoin exhibits complex and diverse characteristics.
The different positions of Trump and Harris on cryptocurrencies, as well as the political forces and interests behind them, have brought different expectations to the Bitcoin market.
Trump's positive attitude towards cryptocurrencies, while to some extent attracting the attention of investors, has also raised questions about conflicts of interest and legitimacy. Harris' proposed regulatory framework, although relatively conservative, provides a certain direction for the stable development of the market.
In terms of legal regulations, the challenges to anti-money laundering laws and the advancement of the Digital Asset Bill will have a significant impact on the Bitcoin market. The Biden administration's attitude towards the anti-money laundering rules of the Trump administration is unclear, creating uncertainty in the market. While the introduction of the Digital Asset Bill to some extent provides norms and guidance for the market, it also faces partisan opposition and a complex legislative process, and its future progress is still unclear.
However, despite the many uncertainties, the impact of the U.S. election on the form of Bitcoin remains a focus of market attention. Investors, policymakers, and industry participants are closely monitoring the election results and subsequent policy directions to assess the future development of the Bitcoin market.
Looking to the not-too-distant future after the election, if the new administration adopts a more proactive cryptocurrency policy, it may drive the development of the Bitcoin market, attracting more investment and innovation. Conversely, if the government strengthens regulation, it may put some pressure on the market, but it will also help to regulate the market order and protect the interests of investors.
In addition, the post-U.S. election stance will also influence the regulatory attitudes of countries around the world towards Bitcoin and cryptocurrencies. As the cryptocurrency market continues to develop, international cooperation and coordination will become increasingly important to avoid regulatory arbitrage and market instability.
Regardless of the outcome of the U.S. election, I solemnly remind everyone to closely monitor policy changes and do a good job of risk control to cope with potential market volatility. Only by remaining unchanged in the face of change can we maintain an unbeatable position.
