Bitwise: What Trump's election means for cryptocurrencies

There’s no doubt about it: Crypto won the election on November 5th.

The market rose sharply on this news.

The Republican Party has written pro-crypto policies into its party platform, has decisively won the presidential election, controls the Senate, and appears poised to retain control of the House of Representatives. The Republican Party will take office in January with strong power to fulfill its campaign promises to the cryptocurrency industry, including:

• Changes in leadership at the U.S. SEC;

• The end of Operation Chokehold 2.0, which restricted the ability of cryptocurrencies to access the traditional banking system;

• Pro-crypto legislation regarding stablecoins, market structure, and more.

As I write this, Bitcoin is trading at all-time highs and other crypto assets are also up sharply. In the short term, I don't know if we will hold our highs or fall back. But in the medium to long term, I think we will go higher.

Specifically: I expect Bitcoin to approach $100,000 this year and $200,000 by 2025. Other crypto assets (which have previously faced more regulatory risk) may fare even better.

I have never been more optimistic than I am right now. Below, I want to share three key thoughts on the future of cryptocurrencies.

Idea 1: Cryptocurrency unbundling — we can finally see what cryptocurrencies can do

Crypto has been operating on a shackles for the past four years.

It has faced numerous lawsuits from the SEC and hostile actions from other regulators. Even basic rights, such as the right to access banking services or to keep Bitcoin in an institutional setting, have been restricted or threatened.

This hostile environment casts a huge shadow over the entire industry, hindering mainstream adoption and scaring off institutional investors. For TradFi companies, investing in disruptive new technologies is one thing, but investing in technologies that are under constant regulatory threat is another.

Now, all of that is gone, and in a momentous election, Washington will have a pro-crypto Congress and president.

I think lifting the veil will accelerate the development of all aspects of cryptocurrency. It will drive more institutional investment, spark widespread adoption of crypto in the financial services industry, and accelerate innovation and mainstream adoption.

Cryptocurrency has long promised to change society in positive ways; now we have a chance to see it tried.

We are entering the golden age of cryptocurrency.

Idea 2: Remember the context – prices were already rising before the election

I am strongly bullish on cryptocurrencies regardless of the outcome of the November 5 election. The industry is currently facing multiple tailwinds, including:

• Institutional demand is growing rapidly: this is reflected in the massive inflows into Bitcoin ETFs (over $23 billion), 60% of the top 25 hedge funds holding Bitcoin, and blue chip institutions such as Emory University now disclosing new positions in cryptocurrencies. The benefits are staggering: Trillions of dollars of institutional assets currently have 0% exposure to cryptocurrencies; this was already starting to change before the results on November 5th, and will accelerate from now on.

• Limited Supply: We almost forget about it, but the Bitcoin halving in April 2024 reduces the amount of new supply entering the market by billions per year. The limited supply will meet the increased demand in the coming months.

• Debt, Deficits, and Rate Cuts: Unfortunately, the election didn’t change one thing: the US deficit is now $36 trillion and is increasing by $1 trillion every 100 days. The Congressional Budget Office projects that this will continue under Trump’s proposed policies; it could even get worse. Add to that the possibility of further Fed rate cuts and shaky economic conditions, and you have the perfect macro environment that makes Bitcoin a “must have” asset for investors.

• Growing number of real-world use cases: To see how crypto is being used in everyday life, look no further than the huge success of Polymarket, the prediction market that accurately predicted the outcome of this election. Look also at everything from stablecoins to gaming to decentralized finance. Crypto is quickly becoming mainstream.

I could add more: Wall Street’s acceptance of cryptocurrencies; rapid improvements in blockchain technology; companies and governments allocating funds to cryptocurrencies. We were in a bull market before the election results on November 5; the election results will only accelerate this process.

Idea 3: Choice is important

Finally, I would like to remind everyone to be cautious.

The cryptocurrency market is booming right now, with all assets going up. I think it makes sense that people are generally looking forward to a more supportive regulatory environment. This could mean more ETFs, more institutional adoption, and more growth.

But it’s worth remembering that not all crypto projects are good, and not all will succeed. All a regulatory reset does is put crypto on a fair and equal playing field, where it can succeed or fail on its own merits. It’s the responsibility of investors to sift the good stuff out of it all and take a rigorous approach to assessing risk. At Bitwise, we’ll continue to do our part.

As an industry, we have an exciting few years ahead of us. Congratulations to all the investors who took the plunge when cryptocurrencies were still unpopular. You were the early adopters who saw possibilities when others only saw risks. We thank you for taking this journey with us.