Trump's Re-election Sparks Cryptocurrency Market Frenzy: The End of a Feast or a New Beginning?

Trump's Re-election Sparks Cryptocurrency Market Frenzy: The End of a Feast or a New Beginning?Wang Yinggui, a special contributor to the 21st Century Business Herald, recently conducted an in-depth analysis of the volatile cryptocurrency market, exploring the future trajectory of this market boom. From the significant price increases of major cryptocurrencies like Bitcoin and Ethereum, to the surge in Tethers popularity, and the impact of shifting US political landscapes, the article comprehensively dissects the current complexities of the cryptocurrency market and predicts future trends

Trump's Re-election Sparks Cryptocurrency Market Frenzy: The End of a Feast or a New Beginning?

Wang Yinggui, a special contributor to the 21st Century Business Herald, recently conducted an in-depth analysis of the volatile cryptocurrency market, exploring the future trajectory of this market boom. From the significant price increases of major cryptocurrencies like Bitcoin and Ethereum, to the surge in Tethers popularity, and the impact of shifting US political landscapes, the article comprehensively dissects the current complexities of the cryptocurrency market and predicts future trends.

Cryptocurrency Market: Growth Far Exceeding Traditional Markets

As of November 27th, Bitcoin, Ethereum, Solana, Binance Coin, Ripple, Dogecoin, and Shiba Inu saw year-to-date gains of 126.83%, 60.12%, 138.20%, 106.55%, 139.11%, 347.86%, and 148.46%, respectively. This growth significantly outpaces the gains of the Dow Jones Industrial Average (18.66%), the S&P 500 (25.76%), and the Nasdaq (26.98%) during the same period. Since Trump's re-election, these seven cryptocurrencies have also experienced substantial growth, with gains of 38.22%, 50.83%, 45.23%, 14.42%, 186.23%, 135.91%, and 44.04%, respectively. Bitcoin, often considered digital gold, even outperformed the traditional safe-haven asset, gold. While the first gold ETF listed on the New York Stock Exchange on November 8th, 2004, Bitcoin futures ETFs only debuted on October 18th, 2021, and Bitcoin spot ETFs on January 24th, 2023. Despite its later entry, the Bitcoin ETF market has already surpassed $100 billion, with industry experts predicting it will exceed the gold ETF market this year.

US Regulatory Environment: From Crackdown to Potential Easing

The US cryptocurrency industry has long faced a stringent regulatory environment. Gary Gensler, the current SEC Chair, and Senator Sherrod Brown, Chairman of the Senate Banking Committee, have consistently expressed criticism of cryptocurrencies, implementing a series of harsh measures including lawsuits against exchanges like Coinbase, Binance, and Kraken. The Biden administration has also been less than supportive of banks engaging in digital asset custody. The very nature of cryptocurrencies whether they are assets or commodities has become a focal point of contention between regulators and the industry, directly impacting whether the SEC or the Commodity Futures Trading Commission (CFTC) has jurisdiction. In May 2024, the US House of Representatives passed the "21st Century Financial Innovation and Technology Act," aiming to delegate more regulatory power to the more crypto-friendly CFTC, but the bill was ultimately stalled in the Senate.

Trump's re-election offered new hope for the cryptocurrency industry. The Republican party's relatively more lenient stance on cryptocurrencies, coupled with Trump's own positive statements regarding their development, led industry insiders to believe that a new administration would loosen regulations, potentially resulting in explosive growth. Alex Thorne, chief researcher at Galaxy Digital, noted that any regulatory easing would benefit cryptocurrencies other than Bitcoin, as Bitcoin has already achieved a degree of regulatory acceptance while others remain in a grey area.

Tether's Boom: The Intertwining of Political and Economic Interests

Tether's success is closely linked to changes in the US political and economic environment. The decline of the dollar's international status, inflationary pressures, massive government debt, deglobalization risks, and the Bitcoin halving have all contributed to increased investor demand for cryptocurrencies. Furthermore, the active participation of institutional and individual investors, including BlackRock and Elon Musk, has injected strong momentum into the market.

However, some Republican views on hoarding digital assets and increasing dollar reserve assets are considered unrealistic. The dollar, as a fiat currency, derives its value from the US government's creditworthiness and tax-collecting ability, and doesn't require support from cryptocurrencies.

Trump's election brought significant benefits to his nominee for Secretary of Commerce, Howard Lutnick, and his business partner Giancarlo Devasini. Lutnick's firm, Cantor Fitzgerald, has close ties to Tether's issuer and has greatly benefited from its success. Devasini stated that Lutnick would leverage his political influence to shield Tether from regulatory risks. During the Biden administration, Tether faced investigations related to alleged money laundering and facilitating illegal activities.

The Future of Cryptocurrencies: Opportunities and Challenges Coexist

The political, economic, and financial changes brought about by Trump's re-election present both new opportunities and challenges for the cryptocurrency market. The idea of the US attempting to repay government debt using cryptocurrencies is considered far-fetched. However, for countries under US sanctions, cryptocurrencies offer an effective way to circumvent the SWIFT system.

The future universal cryptocurrency may not be the existing Bitcoin or Ethereum, but a newly developed one. Before Trump's inauguration, the cryptocurrency market is expected to maintain strong upward momentum, but Bitcoin's recent sharp decline is noteworthy. Other cryptocurrencies also warrant close observation. US inflation and employment market dynamics will continue to influence cryptocurrency trends.

The core of cryptocurrencies lies in their function as payment tools for blockchain transactions. The widespread application of blockchain technology, particularly the development of digitalization and smart contracts, will create favorable application scenarios for cryptocurrencies. However, purely speculative activity carries the risk of a bubble burst. As the digital economy undergoes transformation and upgrading, stablecoins are receiving increasing attention, and digital asset legislation is accelerating. Ethereum and Solana are vying for dominance in the next-generation blockchain space, while the EU is engaged in a battle for stablecoin supremacy.

The cryptocurrency market needs a stable and healthy economic and financial ecosystem. Extreme shifts in economic policy will harm investor interests; inconsistent policies will lead to disastrous consequences. Tariff and tax-cut policies, in particular, require careful consideration as they are not a panacea. If deep-seated problems in the US economy remain unresolved, simply speculating on cryptocurrencies will not solve the problem and may even backfire.

(This article represents only the author's views. Investment involves risk.)