Bitcoin surged off Trump's win - but these smaller cryptos could benefit even more

MW Bitcoin surged off Trump's win - but these smaller cryptos could benefit even more

By Frances Yue

Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

Bitcoin(BTCUSD) hit a record on Wednesday, after Donald Trump won the U.S. presidential election over Kamala Harris. The former - and now future - president was seen as more friendly to the crypto industry, after he pledged to build a bitcoin reserve and said he wanted to see the crypto "mined, minted and made in the U.S."

The largest cryptocurrency rose 9.4% on Wednesday to as high as $76,251, according to Dow Jones Market Data.

Some smaller crypto posted even more significant gains. I caught up with Matthew Sigel, head of digital assets research at VanEck to talk about which crypto are particularly likely to benefit from the Trump victory and why.

Find Frances Yue on X to share your thoughts on the upcoming Trump presidency and crypto.

Altcoin rally

Trump's win is particularly bullish for crypto with market capitalizations smaller than bitcoin; these are often referred to as altcoins, Sigel said.

Neither a win by Trump nor Harris was seen as likely to have a significant impact on bitcoin in the long term, Sigel told MarketWatch in September. However, as Trump pledged to roll out more crypto-friendly regulations, smaller crypto are likely to benefit more from a potentially more supportive regulatory environment, Sigel said.

Still, bitcoin dominance, which measures the cryptocurrency's market capitalization relative to the total crypto market, stood at 60.8%, the highest level since March 2021. It rose 0.5% on Wednesday, according to data from TradingView.

In particular, tokens that the U.S. Securities and Exchange Commission had alleged to be securities are likely to benefit the most from the Trump victory, Sigel said. The SEC had taken a number of enforcement actions against several crypto companies, including sending a Wells notice to decentralized finance exchange Uniswap and charging Consensys Software Inc. with engaging in the unregistered offer and sale of securities, such as liquid staking tokens provided by Lido. A Wells notice indicates that the SEC may recommend an enforcement action against the recipient.

With Trump expected to return to the White House on Jan. 20 next year, "the entire legal approach took by the SEC against crypto is now up in the air," Sigel said.

Uniswap's token jumped 30.8% on Wednesday to $9.38 and Lido surged 32.1% to $1.28.

Meanwhile, some other decentralized finance tokens also significantly outperformed bitcoin on Wednesday. Decentralized finance usually refers to financial services built on blockchains that allow peer-to-peer transactions and eliminate middlemen. Aave, which offers automated crypto loans, saw its token up 27% and automated market maker Raydium's token was up 22.3%.

It reflects traders' optimism on decentralized finance if Trump sets up a more friendly regulatory environment for crypto, Jake Ostrovskis, trader at Wintermute wrote in a Wednesday note.

Bitcoin to outperform?

Bitcoin has outperformed other risk assets in the 360 days following Election Day in the last three election years prior to this year, according to analysts at Hashdex.

In 2012, 2016 and 2020, bitcoin recorded a gain of 1809.9%, 916% and 354.1%, respectively, the analysts noted.

In comparison, the S&P 500 SPX rose 24%, 21.3% and 38.3% in those years, respectively, according to Hashdex data.

To be sure, created in 2009, bitcoin is still a fledgling and volatile asset. The past few U.S. election years also coincided with bitcoin's halving years, in which the reward for bitcoin mining was cut in half, meaning miners received 50% fewer bitcoins for verifying transactions.

As a mechanism written into the bitcoin blockchain's algorithm to control the coin's supply, which has a cap of 21 million, halvings are scheduled to happen after every 210,000 blocks that are mined - or about every four years - until the maximum supply of bitcoin is all released.

The most recent bitcoin halvings happened on Nov. 28, 2012; July 9, 2016; May 11, 2020; and April 19 of this year.

Crypto in a snap

Bitcoin (BTCUSD) has gained 6% over the past seven days, to around $76,108 at the time of writing Wednesday. Ether (ETHUSD) has edged up 0.8% over the past seven days, to around $2,698, according to Dow Jones Market Data.

Must-reads

-- The French crypto whale looks to have made $47 million from his Trump bets (MarketWatch)

-- Crypto bulls are doubling down on a second Trump presidency for this key reason (MarketWatch)

-- The Crypto Industry's Spending on the Election Pays Off (New York Times)

-- What Trump's Election Win Means For Crypto (Time Magazine)

-Frances Yue

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 06, 2024 16:48 ET (21:48 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.