How to invest in crypto depends on whether Trump or Harris becomes president

Author: Frederick Munawa Source: unchainedcrypto Translation: Shan Ouba, Golden Finance

In the US presidential campaign between Donald Trump and Kamala Harris, cryptocurrencies have suddenly found themselves in the enviable position of becoming a key economic policy issue, with Trump vowing to make Bitcoin a strategic reserve asset and Harris pledging support for “emerging technologies.”

Trump took the lead in appointing Wyoming Republican Senator and so-called “Crypto Queen” Cynthia Lummis to propose a new bill to the US Senate authorizing the purchase of 1 million Bitcoins (BTC) over 5 years.

Last month, Loomis told about 8,000 attendees at the Bitcoin 2024 conference in Nashville, Tennessee: "It will last at least 20 years and it will have one purpose - to reduce our debt."

In contrast, the Harris administration is widely seen as hostile to cryptocurrencies, and she has remained largely silent on the issue. Harris did not mention cryptocurrencies at all in her speech accepting the Democratic nomination on Thursday night. Democratic leaders did meet with cryptocurrency company executives recently in an effort to ease tensions, but their efforts were largely unsuccessful. But on Wednesday, Brian Nelson, a senior campaign policy adviser to the Harris campaign, said at a Bloomberg News roundtable that Harris would "support policies that ensure that emerging technologies and such industries can continue to grow."

Traditional polls show Harris leading Trump by 3.6 percentage points at 47.2% to 43.6%, but prediction market Polymarket shows the former president leading Harris 51% to 48%.

Bitcoin

Bitcoin is perhaps the digital asset most likely to enjoy significant price appreciation if Trump is re-elected to office.Assuming the plan is implemented in 2025, the plan to buy 1 million bitcoins over 5 years would mean buying 200,000 bitcoins per year until 2030.

Bitcoin

Bitcoin is perhaps the digital asset most likely to enjoy significant price appreciation if Trump is re-elected to office.Assuming the plan is implemented in 2025, the plan to buy 1 million bitcoins over 5 years would mean buying 200,000 bitcoins per year until 2030.

Such buying pressure would almost certainly push the cryptocurrency’s price well above its all-time high of nearly $74,000 set in May, potentially sparking an epic bull run that would benefit all stocks.

“It’s hard to know which assets will be more affected because there’s potential upside in almost everything,” cryptocurrency researcher Noelle Acheson told Unchained. “BTC will see more institutional adoption.”

A recent CoinDesk report showed that traders were generally bullish on Bitcoin’s price during the election, with twice as many call options expiring four days after the Nov. 4 election as put options on bitcoin derivatives platform Deribit. Call options are a leveraged bet that pays out if Bitcoin prices rise, while put options pay out if prices fall. The strike price (profit threshold) for the call options reportedly ranges from $70,000 to $140,000, with $80,000 being the most popular. This effectively means that many traders expect Bitcoin to break $80,000 during the election.

MicroStrategy

Software company MicroStrategy (MSTR) is the world's largest corporate holder of Bitcoin, with 226,500 BTC, or about 1.1% of all available coins, currently worth just under $14 billion.

The company has borrowed billions of dollars to regularly purchase digital assets over the past four years and has evolved into an ideal Bitcoin proxy for investors who are unable or unwilling to purchase cryptocurrencies directly.   

In a speech delivered after Trump’s Bitcoin Conference keynote, Loomis mentioned the company’s executive chairman and founder, Michael Saylor, though it’s unclear if Saylor influenced the Trump campaign’s plans for a strategic reserve of Bitcoin.  

“As Michael Saylor said yesterday… we’re going to eliminate America’s debt,” Loomis said. “With Bitcoin, we’re going to get rid of debt.”

South Korea’s largest pension fund, the National Pension Service (NPS), an entity with nearly $780 billion in assets, recently bought $34 million worth of MSTR shares, demonstrating MicroStrategy’s appeal as a Bitcoin alternative.

Mike Butler, options trader at financial network Tasty Live, noted that MSTR stock will be one of the assets that will benefit after the election, especially if Trump wins. “Their entire business model has pivoted towards acquiring as many Bitcoins as possible, so the stock moves faster relative to Bitcoin,” Butler told Unchained. This means that Bitcoin’s price swings are magnified in the stock. He further noted that MicroStrategy’s stock recently underwent a 10-for-1 split, so it’s now even cheaper at around $133 per share. Coinbase Butler also mentioned that Coinbase is another major beneficiary of a second Trump administration. The cryptocurrency exchange generated $1.4 billion in revenue in the second quarter, according to its second quarter financial report released in early August. It owns 9,000 Bitcoins, making it the fifth-largest Bitcoin holder. “Coinbase is certainly the most popular exchange, and they hold Bitcoin themselves,” Butler said.

In the company's second quarter letter to shareholders, the company placed great emphasis on "achieving regulatory clarity."

The letter reads: "We have seen crypto legislation become a mainstream issue with bipartisan support. Both the House and the Senate have real energy to pass meaningful legislation."

So far, only the Republicans have put forward specific regulatory proposals, but researcher Acheson said the lack of specific proposals from the Democratic Party may just be due to standard bureaucracy.

The Democratic Party released its official party platform a few days ago, but it did not contain any content related to cryptocurrency. However, the party platform appears to have been drafted before President Joe Biden withdrew from the campaign, as it mentions him as a candidate.

Acheson said that the current absence of crypto-related policies does not mean that they will not be introduced in the future.    

“If an apparently necessary name change is difficult to get approved through layers of committees and lengthy sign-off processes, imagine how difficult it will be to add new language that could be controversial,” Acheson said.

She also said that companies like Coinbase that have been hit hard by regulation could enjoy a friendlier environment no matter which candidate wins the election.

“The bottom line is that the Republican Party is more favorable to the prospects of cryptocurrency given the Republican candidates’ approval ratings and their pro-business, pro-innovation stances on many issues,” Acheson explained. “But if the Democrats win, there will also be less regulatory hostility, which is also a benefit.” ETH, Stablecoins and CBDCs According to a July 27 article from derivatives firm CME Group, over a two-year period, Bitcoin’s daily price movement explained 75% of Ether’s daily price movement. The firm calculated that for every 1% movement in BTC, ETH moved 1.105% on average. In other words, a bull run in Bitcoin also means a bull run in Ether, and potentially even other cryptocurrencies. Stablecoins would also benefit greatly, given Trump’s promise to establish an effective stablecoin framework. “As part of our efforts to increase regulatory clarity, we will be creating a framework to ensure the safe and responsible expansion of stablecoins,” Trump said during his Bitcoin Conference keynote.

Since dollar-denominated stablecoins such as USDC are typically backed by cash (USD), Trump argued that the reason for such a framework is to strengthen the dollar’s ​​waning global relevance and dominance by expanding dollar-backed stablecoins “to new areas around the world.”

One ​​idea that the Trump campaign has explicitly denounced is the concept of a central bank digital currency (CBDC). CBDCs are widely rejected in the industry because they can serve as a tool for government surveillance. In January, Trump reportedly told a crowd in New Hampshire that CBDCs were a “dangerous threat to freedom.”    

Trump stressed: "There will never be a CBDC during my presidency."

This is bad news for initiatives such as MIT's OpenCBDC project and its investors.

Will Harris conjure up a Pokémon?

Many have lamented the Harris campaign's silence on its plans for the cryptocurrency space, which prevents investors from making smart investment decisions. Pedro Lapenta, head of research at cryptocurrency ETF company Hashdex, said: "While former President Trump has been outspoken in his support for Bitcoin and the cryptocurrency industry, Vice President Harris has not publicly stated his position. It is clear that Trump is more likely to form an administration that prioritizes the development and advancement of this industry."

If Harris is elected president, Bitcoin is likely to continue to be a safe investment choice. Gary Gensler, chairman of the Securities and Exchange Commission (SEC), has publicly stated that “everything except Bitcoin is a security.”

Therefore, for risk-averse investors, BTC and any of the 11 spot Bitcoin exchange-traded funds (ETFs) are good choices. 

Ether is another asset that could continue to thrive under a Harris administration. On June 18, the SEC concluded its investigation into Ethereum 2.0 after being sued by Consensys, a major company in the Ethereum ecosystem. According to an article by Consensys, the investigation could lead to Ether being classified as a security. 

The SEC then approved multiple spot Ether ETFs in July, further strengthening the legitimacy of Ether as a commodity rather than a security. As with Bitcoin, spot Ether and Ether ETFs are relatively safe bets if Harris is elected president, even if Gensler remains SEC chair.  

“Ether is no longer a security now,” Acheson explained. “But many developers who build applications on it want more assurance that they won’t be sued for violating securities laws,” she added.  

Investment decisions in crypto assets other than Bitcoin and Ether will be difficult to make without knowing how a Harris administration would approach policy in the space.

During her keynote address at the Democratic National Convention, Harris discussed her general plan for the economy but did not address cryptocurrencies specifically.   

Harris said: "We are going to create what I call an opportunity economy. It's an opportunity economy where everyone has a chance to compete."

Harris may continue to carefully avoid the issue, but it is also possible that her campaign team is brewing proposals similar to Trump's and is just waiting for the right time to reveal them.

"Harris was wise to wait until after the convention to talk about cryptocurrency," Acheson said. "Her nomination is not 100% certain until the convention votes, and why risk a conflict with influential party members before the dust settles?"