By Joe Light
The crypto industry spent more than $170 million on the 2024 election in an effort to ensure the next Congress was on its side. The money was well-spent.
From the White House to the Senate and House, the industry's favored lawmakers are set to take power, while some of its biggest detractors have lost their seats. Partly as a result, the price of Bitcoin and industry players such as Coinbase Global surged. On Wednesday, Bitcoin traded at about $76,000 near a record high and up 9.6% in the last 24 hours. Coinbase rose about 31% to $254.
While it's a good day for cryptocurrencies, the path forward is far from certain. Here are three takeaways.
Pro-Crypto Lawmakers Came Up Big
President-elect Donald Trump has promised to make the U.S. the "crypto capital of the planet." He has said he would have the U.S. hold Bitcoin for strategic purposes and would fire Securities and Exchange Commission Chair Gary Gensler, who has brought many lawsuits against crypto companies for allegedly violating securities laws.
It might be hard to remember, but Trump during his first term said he was "not a fan" of Bitcoin that it facilitated crime. This cycle, however, his campaign raked in tens of millions of dollars from crypto executives including the Winklevoss twins and venture capital investors Ben Horowitz and Marc Andreessen.
Crypto had victories in Congress, too. A $40 million campaign in Ohio helped to oust Democratic Sen. Sherrod Brown, who chairs the Senate Banking Committee and was seen as an enemy of the industry. His opponent Republican Bernie Moreno, on the other hand, founded his own blockchain-based business.
"Tonight the crypto voter has spoken decisively -- across party lines and in key races across the country," said Coinbase CEO Brian Armstrong in a post on X, saying the election resulted in "America's most pro-crypto Congress ever."
Crypto Enforcement Is Set to Diminish
While Bitcoin has proven it can thrive no matter who is in the White House, the regulatory environment is set to get much more favorable for trading platforms such as Coinbase.
Gensler's SEC has sued Coinbase, Binance, and other trading platforms alleging they are operating as unregistered securities exchanges. The firms deny those charges.
Now that Gensler is certain to be replaced as chair, crypto executives believe a Republican successor will take a much less aggressive stance and potentially write crypto-specific rules for the industry, something Gensler has declined to do. Republican SEC Commissioner Hester Peirce, who is considered a possible replacement for Gensler, has said the agency should "sit down and do the hard work to create a framework that makes sense."
"For the last four years, you got the sense that the referee was back on the field. Maybe under Trump the sense is that the referee is being a little less involved," said Mizuho analyst Dan Dolev, who has been a longtime bear on Coinbase stock.
Dolev says that, counterintuitively, less regulation of the crypto industry could hurt Coinbase in the long-term by inviting more competitors to enter the space and driving down fees the firm can charge investors. Still, he says Coinbase will benefit so long as the market as a whole continues to grow.
Crypto firms also want Congress to pass legislation that would clarify the rules around stablecoins and around trading platforms like Coinbase. Both bills have gotten bipartisan support and with more supporters in Congress, the support is likely to increase. The remaining question is how soon the next Congress will take up one or both bills, given that it will have other big-ticket items on the agenda, such as extending Trump's 2017 tax cuts.
Crypto's Long-term Bull Case Likely Depends More on Macro Factors
After today's surge, the medium-to-longterm bull case for Bitcoin and crypto-tied stocks likely relies on macroeconomic factors. Both Bitcoin and Coinbase have tended to perform in line with other risky assets, and expectations for the pace of the Federal Reserve's interest rate cuts will probably be a bigger driver of prices than the presidency.
Bitcoin should also benefit from a "debasement trade" if Trump's massive tax cut proposals lead to higher debt and inflation, wrote JPMorgan analysts in a research note on Wednesday.
It could be a long time before it becomes clear if Trump can follow through on some of his most ambitious proposals, but for now, the wind is at crypto's back.
Write to Joe Light at joe.light@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 06, 2024 16:13 ET (21:13 GMT)
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