Donald Trump’s decisive victory in the presidential election last week has sent shockwaves through financial markets as the so-called “Trump trade” ignited around the world. The dollar gained the most in years, bonds slumped, the stock market surged and gold dipped.
And then there’s Bitcoin, whose price soared past $90,000 this week, with its market cap of $1.5 trillion exceeding that of all but the largest companies in the world.
Benjamin Graham, the father of value investing, once said that markets are voting machines in the short run and weighing machines in the long run. It appears 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 so rapidly responded to his re-election. And while you can’t prove a counterfactual, it’s unlikely that markets would have reacted in quite the same positive way had Harris 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 advocates and investors have high hopes for what a Trump administration might bring and they’re plowing record amounts of money into these assets.
On Nov. 7, investors put $1.4 billion into Bitcoin ETFs followed by another $1.1 billion on Nov. 11. Interestingly, Biden’s election win in 2020 also precipitated a rally in Bitcoin, with the price soaring 149% from Nov. 5, 2020, until inauguration day the following January.
At the time, there was optimism that the new administration would offer a fresh start for the crypto industry. As of Nov. 14, Bitcoin is up 33% since Trump’s re-election.
It appears that once again animal spirits have been unleashed. Consider Dogecoin (DOGE), a memecoin — or digital asset based on some irreverent internet culture — that has climbed more than 70% in just a week, and now has a bigger market value than the 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 viewed as more business-friendly, leaving the market to innovate unmolested.
Third, there is much the government can do to actively encourage innovation and investment by setting clear rules of the road; there’s hope now that the crypto industry will finally achieve regulatory clarity under a Trump presidency.
Brandon Potts, a partner at Framework Ventures, a web3 venture capital firm, said recently how “everything we have done to date has been operated in a grey area as it relates to crypto in the United States.”
What he means is today there is uncertainty over the very nature of cryptoassets: Are they securities, commodities, or something else entirely?
Many big companies are worried about innovating in this space for fear of inadvertently hitting an SEC tripwire which could haunt them for years to come.
Regulatory clarity would encourage American founders to stay in America, kick-start enterprise adoption, and drive institutional investment.
Bitcoin has surged, and many of the companies that operate in the space like Coinbase and Hut8 have fared well, which makes sense if you assume markets are now pricing in a shift from government regulation as a headwind to government support as a tailwind.
Memecoins have outperformed, with Dogecoin (DOGE), Pepe (PEPE), dogwifhat (WIF), and Shiba Inu (SHIB) beating Bitcoin handily.
Dogecoin got an added boost when Trump announced the creation of the Department of Government Efficiency (a k a DOGE), to be co-headed by former presidential candidate Vivek Ramaswamy and Elon Musk, who’s been a big Dogecoin booster.
Google search results for DOGE surged by more than 700% in the wake of the Trump announcement, and the cryptocurrency community celebrated this as a win.
Trump’s rise to becoming the talisman of the crypto industry, and naming government departments after internet memecoins, was unlikely until recently. Back 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 begun earlier, but it was crystalized at the Bitcoin 2024 conference in Nashville, hosted by the industry leader BTC INC. on July 27 of this year.
Robert F. Kennedy, Cantor Fitzgerald Chairman, and Trump transition boss 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 assuming office he would dismiss Gary Gensler, the SEC chairman who is unpopular with the industry. “We will have regulations, but from now on the rules 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 lure potential donors and motivate crypto-focused voters to swing his way by showing he would protect their businesses, livelihood, and investment portfolios.
This election cycle, the crypto industry spent $160 million on campaign financing, making it one of the biggest contributors.
But this wasn’t just wealthy donors throwing their financial weight around. Many voters clearly 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 spotted a disaffected group who felt alienated by the status quo and owned the issue. By the time Harris extended her own olive branch, making crypto an oddly positioned cornerstone of her appeal to black men in late October, it felt like too little too late to change many minds.
Crypto donors didn’t just influence the presidential election. They also targeted congressional races.
The website Standwithcrypto.org shows just how much this strategy has paid off. In 2024, voters elected 257 pro-crypto candidates to the house, compared with 115 anti-crypto candidates, and added 16 pro-crypto senators, to 12 anti-crypto senators.
Crucially, in the eyes of industry insiders, Ohio senator and anti-crypto crusader Sherrod Brown was defeated by Republican Bernie Moreno who has courted the crypto vote. As Potts said, “The clear message is that crypto won.”
So, what can we expect from the new administration? Trump will likely clean house at most federal agencies, including the Securities and Exchange Commission, where he has vowed to replace the current chairperson.
Under new leadership, advocates hope, more crypto-asset exchange-traded funds (ETFs) could be approved and more crypto-native businesses could be permitted 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 could very-well drop its suits against Coinbase alleging the company is operating a brokerage exchange without a license. This would then set a precedent for other companies who want 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 may even establish a strategic Bitcoin reserve, some hope, and abolish taxes on many small-dollar crypto asset transactions, making it easier to use these assets for everyday transactions.
To be sure, there is much the government can do to accelerate and enable innovation. And much of this relies on Trump and his pro-crypto allies in Congress and industry focusing on the hard issues and doing the work of getting legislation drafted and passed.
Those who have worked closely with Trump have said how he is notoriously mercurial – easily swayed on many issues. Will he stay interested in web3 and appoint people who can enact this agenda?
The recent appointment of Musk and Ramaswamy, both crypto adherents, to head up DOGE should encourage many. Between now and Jan. 21, the industry will get a lot more evidence one way or the other. For a decade or more, web3 has operated in a grey area. Now is the time for it to step into the light.
Alex Tapscott is the author of “Web3: Charting the Internet’s Next Economic and Cultural Frontier” and managing director of the Digital Asset Group, a division of Ninepoint Partners LP