Unraveling the Crypto Revolution under the Trump Administration
Bitcoin's Post-Election Boom
On Election Day, bitcoin was worth $69,374 according to Coinbase. Within a month, it spiked more than 44 percent, reaching a milestone of over $100,000 for the first time. This surge wasn't isolated to bitcoin; other cryptocurrencies like ethereum and XRP also saw significant growth during this period. The sudden increase in value is a clear sign of investor optimism about President-elect Donald Trump's policies and those of his picks to head key regulatory agencies. Some of these nominees have explicitly promised deregulation of the crypto industry, which has triggered a flood of money into these markets.As Ramaa Vasudevan, an economics professor at Colorado State University, pointed out, "That bitcoin hit the $100,000 mark reflects the expectation of both political support and regulatory latitude under the incoming administration." The nomination of crypto-enthusiasts for administrative posts has sent a strong signal of the embrace of bitcoin and crypto.
Trump's election may have sparked the initial rally, but the financial establishment's growing acceptance of bitcoin in recent months provided the necessary fuel. Once a niche curiosity, bitcoin is now a mainstream digital currency that everyday Americans can invest in through reputable retail investment accounts. This increased legitimacy has given bitcoin some staying power, even if it is still debated whether it is a bubble or a legitimate investment.
Trump's Crypto Support and Regulatory Choices
Throughout his presidential campaign, Trump has been a staunch supporter of cryptocurrencies. His choices to lead key government agencies related to crypto regulation reflect this enthusiasm. For example, the nomination of Paul Atkins to head the Securities and Exchange Commission (SEC) was a significant event. Atkins, who was previously an SEC commissioner during George W. Bush's administration, is seen as a pro-deregulation figure.Molly White, a cryptocurrency researcher and critic, noted that "Atkins is fairly establishment; he has the SEC background, but he also was a very strong advocate for deregulation when he was in the SEC and certainly since then." Atkins is also a co-chair of the Chamber of Digital Commerce's Token Alliance, which advocates for lax regulation of cryptocurrencies.
Perianne Boring, the CEO of the Chamber of Digital Commerce, is rumored to be one of Trump's top picks to head the Commodity Futures Trading Commission (CFTC). Currently, cryptocurrency is under the purview of the SEC, but the Trump administration is considering regulating it as a commodity instead, which would bring it under the CFTC's jurisdiction. This change could have a significant impact on the regulatory landscape of cryptocurrencies.
Bitcoin's Establishment as a Digital Asset
Over the past five years, especially after the downfall of crypto trading platform FTX in 2022, the narrative around cryptocurrency's utility has shifted. It is now being promoted more as an investment instrument rather than a currency for daily transactions. This pivot has also contributed to its valuation.In January, the SEC approved the first bitcoin exchange-traded funds (ETFs) in the US. ETFs provide indirect access to cryptocurrency, allowing investors to participate in the market without directly buying and storing bitcoin. Firms like BlackRock, Invesco, Fidelity, Grayscale, and Ark Invest have launched bitcoin funds, offering new investors easier ways to invest in cryptocurrency.
Previously, investors had limited options for trading bitcoin. They could buy it on an exchange but faced challenges in storing it safely. Now, ETFs offer an established and regulated option. However, as Swati Sharma, Vox Editor-in-Chief, mentioned, "While no one can predict the exact inflection point or when the price will stabilize, the long-term driver of bitcoin's rise is its evolution — not just as digital gold, but as a foundational layer of global financial infrastructure."
Despite the optimism, there are concerns. Vasudevan warned that there is still reason to believe that crypto's climb won't last forever. Bitcoin has surged before only to crash precipitously, as seen in November 2022 after the FTX collapse. The price of crypto is still based largely on speculation rather than inherent value.
Uncovering the Crypto Influence in Elections
Understanding the Crypto Phenomenon
Cryptocurrencies are digital assets that operate independently of a country or financial institution. They rely on a blockchain, a secure and decentralized virtual ledger that meticulously records every transaction. Industry research indicates that those who own cryptocurrency are typically young and racially diverse. They view cryptocurrency as a means to gain more control and freedom over their financial lives. Overall, they advocate for clearer regulations and seek candidates who are open to emerging technologies.For instance, Brad Garlinghouse, the CEO of Ripple, whose cryptocurrency XRP is one of the largest in the world, emphasizes the significance of this industry. He believes that those who underestimate the passion of crypto enthusiasts are missing a crucial aspect. Cryptocurrencies offer a unique financial alternative that attracts a specific demographic.
The voter base for cryptocurrencies is on the rise and presents an opportunity. While they support policies favorable to the industry, crypto voters do not have a unified stance on which party will best serve their interests. Most research shows a near-even split between support for the Republican and Democratic parties.
The Role of Advocacy Organizations
To assist voters in making informed decisions, the advocacy organization Stand With Crypto assigns grades to politicians based on their statements about the industry. President-elect Donald Trump received an A grade. Initially critical of bitcoin in 2021, Trump has since embraced the industry. He even announced his new cryptocurrency business, World Liberty Financial, and appointed David Sacks as his "White House A.I. & Crypto Czar," highlighting his intention to boost the crypto sector.On the other hand, John Reed Stark, a former chief of internet enforcement at the Securities and Exchange Commission, is critical of crypto. He understands the reasons behind people's interest but maintains that cryptocurrency is dangerous. He believes that the financial crisis led to a lack of trust in institutions, which contributed to the appeal of cryptocurrency.
However, the industry was not straightforward in making crypto connections in its ads. For example, Democrat Rep. Katie Porter in California was criticized for cryptocurrency mining in a letter she co-signed with a known crypto skeptic. But during her Senate primary, every negative ad against her was funded by crypto, highlighting the complex nature of the crypto influence in elections.
The Crypto Industry's Campaign Spending
In this year's election, the crypto industry supported 29 Republicans and 33 Democrats. The largest crypto industry super PAC, Fairshake, started in part by Ripple, spent $131 million on ads supporting pro-crypto candidates. It also has an additional $103 million reserved for pro-crypto candidates in the mid-term elections two years from now. Interestingly, none of the television ads paid for by Fairshake this year mentioned crypto, even those against Porter.Ripple CEO Garlinghouse argues that even without direct mention of crypto, the commercials were still educating voters. But Stark is not convinced, stating that elected officials were clear in their support of crypto, and it remains to be seen if voters truly understood the implications.
The video above was produced by Brit McCandless Farmer and edited by Scott Rosann.Geopolitical Uncertainty in Syria
Rebel forces have ousted President Bashar al-Assad and taken control of Damascus, ending 13 years of civil war. This major regime change has left investors waiting to see what it will entail for geopolitics in the Middle East. Media reports suggest that al-Assad has landed in Moscow, and Israeli forces have entered Syria. The situation in Syria is adding an element of uncertainty to global markets.Investors are closely monitoring these developments as they could have significant implications for various asset classes. The uncertainty surrounding Syria's future may lead to increased volatility in financial markets in the coming weeks and months.
Moreover, the outcome of this geopolitical event could also influence the Federal Reserve's decisions regarding interest rates. With the focus on consumer price index inflation data due on Wednesday, any further developments in Syria could add another layer of complexity to the economic picture.
Consumer Price Index Inflation Data
This week, the main focus is on the consumer price index inflation data. According to Reuters estimates, the reading is expected to show a 2.7% year-on-year increase in the headline figure through November. Core CPI inflation is also anticipated to have remained sticky in November, which may give the Federal Reserve less incentive to cut interest rates aggressively.The data will provide crucial insights into the state of the U.S. economy and help guide the Federal Reserve's monetary policy decisions. A higher-than-expected inflation reading could potentially lead to a more cautious approach from the central bank regarding rate cuts.
However, despite the expected increase in inflation, the labor market remains strong. Data on Friday showed stronger-than-expected growth in nonfarm payrolls, but the participation rate shrank, and growth in manufacturing payrolls was underwhelming. This suggests that while the economy is showing some signs of strength, there are also areas that require attention.
Impact on Wall Street
Wall Street indexes mostly shrugged off the strong payrolls data on Friday. Gains in technology stocks, driven by persistent optimism over artificial intelligence, offset declines in other economically sensitive sectors. The S&P 500 rose 0.3% to 6,090.27 points, while the NASDAQ Composite rose 0.8% to 19,859.77 points, both reaching new highs. However, the Dow Jones Industrial Average lagged, falling 0.3% to 44,642.52 points.The performance of different sectors on Wall Street highlights the complexity of the current market environment. While technology stocks continue to drive the upward trend, other sectors are facing challenges and adjustments.
Markets are also eagerly awaiting more cues on what President-elect Donald Trump's policies will bring to the U.S. in the coming years. His policies could have a significant impact on various industries and markets, adding another layer of uncertainty to the already complex economic landscape.