Donald Trump’s decisive victory in the presidential election last week sent shockwaves through financial markets as the so-called “Trump trade” flared up around the world. The dollar gained the most in years, bonds fell, the stock market rose and gold sank.
And then there’s Bitcoin, whose price soared above $90,000 this week, with its $1.5 trillion market cap exceeding that of all but the world’s largest companies.
Benjamin Graham, the father of value investing, once said that markets are voting machines in the short term and weighing machines in the long term. It appears that investors are voting with their feet and their dollars, sending a wide range of assets higher.
But it will take many months — if not years — to weigh the true impact of a Trump presidency on the many industries and asset classes that responded so quickly to his re-election.
And while you can’t prove a counterfactual, it’s unlikely that the markets would have reacted in the same positive way if Harris had been elected.
The biggest winner of the Trump trade has been a big winner is Web3, the blockchain-enabled internet, and assets like Bitcoin, Ethereum and Solana.
Web3’s backers and investors have high hopes for what a Trump administration might bring, and they are pouring record amounts of money into these assets.
On November 7, investors put $1.4 billion into the Bitcoin ETF followed by another $1.1 billion on November 11.
Interestingly, Biden’s 2020 election victory also sparked a rally in Bitcoin, with the price rising 149% from November 5, 2020, to Inauguration Day the following January.
At the time, there was optimism that the new administration would provide a fresh start for the crypto industry. As of November 14, Bitcoin is up 33% since Trump’s re-election.
It seems that once again the animal spirits have been released. Consider Dogecoin (DOGE), a memecoin — or digital asset based on a rogue Internet culture — that has risen more than 70% in just one week and now has a larger market value than Ford Motor Company.
Why is the industry so hopeful? First, they argue that nothing is better than the Biden administration, which was openly hostile to the web3 industry.
Second, a Trump presidency is seen as more business-friendly, leaving the market to innovate unfettered.
Third, the government can do much to actively encourage innovation and investment by setting clear rules of the road; now there is hope that the crypto industry will finally achieve regulatory clarity under the Trump presidency.
Brandon Potts, a partner at Framework Ventures, a web3 venture capital firm, recently said how “everything we’ve done to date has operated in a gray area as it relates to crypto in the United States.”
What he means is that today there is uncertainty over the very nature of cryptoassets: are they securities, commodities or something else entirely?
Many large companies are wary of innovating in this space for fear of inadvertently tripping over an SEC hook that could follow them for years to come.
Regulatory clarity would encourage US founders to stay in America, drive enterprise adoption and boost institutional investment.
Bitcoin has soared and many of the companies operating in the space like Coinbase and Hut8 have done well, which makes sense if you assume that the markets are now pricing in a shift from government regulation as a headwind to supporting government as a tailwind.
Memecoins have outperformed, with Dogecoin (DOGE), Pepe (PEPE), dogwifhat (WIF) and Shiba Inu (SHIB) handily beating Bitcoin.
Dogecoin got a boost when Trump announced the creation of the Department of Government Efficiency (aka DOGE), to be co-chaired by former presidential candidate Vivek Ramaswamy and Elon Musk, who has been a big booster of Dogecoin.
Google search results for DOGE increased by more than 700% after Trump’s announcement, and the cryptocurrency community celebrated this as a victory.
Trump’s rise to become the talisman of the crypto industry and naming government departments after internet memecoins was unlikely until recently. In 2020, during his first turn in the White House, Trump reportedly wanted to ban Bitcoin.
How things have 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, Cantor Fitzgerald Chairman and Trump transition chief Howard Lutnick, as well as US Senators Cynthia Lummis, Bill Hagerty and Marsha Blackburn rounded out the lineup.
In his 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 upon taking office he would fire Gary Gensler, the SEC chairman, who is unpopular with the industry. “We will have regulations, but from now on the regulations will be written by people who love your industry, not hate your industry,” he added.
Trump calculated that by offering his support to the crypto industry, he could entice potential donors and motivate crypto-focused voters to swing his way by showing that he would protect their businesses, livelihoods and wallets. investments.
In this election cycle, the crypto industry spent $160 million on campaign finance, making it one of the largest contributors.
But it wasn’t just wealthy donors throwing their financial weight around. Clearly, many voters cared 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 noticed a disaffected group that felt alienated from the status quo and owned the issue. By the time Harris extended her olive branch, making crypto an oddly positioned cornerstone of her appeal to black men in late October, it seemed too little too late to change much of her mind.
Crypto donors didn’t just influence the presidential election. They also targeted congressional races.
The website Standwithcrypto.org shows how much this strategy has paid off. In 2024, voters elected 257 pro-crypto House candidates, compared to 115 anti-crypto candidates, and added 16 pro-crypto senators, to 12 anti-crypto senators.
Most notably, in the eyes of industry insiders, Ohio Senator and anti-crypto crusader Sherrod Brown was defeated by Republican Bernie Moreno, who has favored the crypto vote. As Potts said, “The clear message is that crypto won.”
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 vowed to replace the current chairman.
Under the new leadership, advocates hope that 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 would bring additional retail and institutional investors into the crypto markets and provide access to growth capital for the industry’s leading businesses.
Under the new administration, the SEC may well drop its lawsuits against Coinbase alleging that the company is operating an unlicensed brokerage exchange. This would then set a precedent for other companies wanting 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, hope, and remove taxes on many small-dollar cryptocurrency asset transactions, making it easier to use these assets for everyday transactions.
Of course, there is much that government can do to accelerate and enable innovation. And much of that relies on Trump and his pro-crypto allies in Congress and industry focusing on the tough issues and doing the work to draft and pass legislation.
Those who have worked closely with Trump have said he is extremely blunt — easily swayed on many issues. Will he remain interested in web3 and appoint people who can adopt this agenda?
The recent appointment of Musk and Ramaswamy, both crypto enthusiasts, to head DOGE should be very encouraging. Between now and January 21, the industry will get a lot more evidence one way or the other. For a decade or more, web3 has operated in a gray area. Now is the time for it to come to light.
Alex Tapscott is the author of “Web3: Charting the Internet’s Future Economic and Cultural Frontier” and managing director of Digital Asset Group, a division of Ninepoint Partners LP
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