How long can the “Trump deal” in the crypto asset market last?

Source: Metaverse Daily Explosion

Trump's assassination and Biden's withdrawal from the election, these two events related to the US presidential election are becoming catalysts for the rebound of the crypto asset market. Bitcoin once broke out of its slump and broke through $67,000, with an increase of more than 10% in a week, and Meme coins about the two people are also emerging in an endless stream.

Donald Trump, the candidate who calls himself the "crypto president", received campaign funds in the form of crypto assets and gained support from his own assassination and his opponent's withdrawal from the election. His canvassing movements have now become the "weather vane" of the crypto asset market. Trump also struck while the iron was hot and worked hard to win votes from the crypto circle.

According to the Wall Street Journal, Trump will give a speech at the 2024 Bitcoin Conference at the end of July and will hold a fundraising event before that.  Satori Research CEO Teong Hng predicts that Bitcoin may soon return to its all-time highs, "with a strong rebound at the end of the year, and Trump's election will be a symbol of it."

However, Ethereum co-founder Vitalik Buterin sang a different tune at this time. On July 18, he wrote an article opposing political voting choices based on "whether to support encryption", because candidates are cryptocurrency-friendly now does not mean they will still do so in five years.

How long can the "Trump deal" of crypto assets last?

01 Trump increases his "crypto-friendly" stance

On July 21, Biden announced in an "open letter" that he would no longer seek re-election and withdraw from the presidential election. Soon, the voices supporting Trump were unprecedentedly high, and coupled with the high-profile image brought by the previous assassination incident, Trump's chances of winning the election increased greatly. Data from the decentralized prediction platform Polymarket shows that Republican candidate Trump's support rate for winning the 2024 election is as high as 61%, far exceeding Kamala Harris (37%) who has the second highest support rate.

Investors on Wall Street believe that Trump is very likely to become president again. Industries that may benefit from Trump's policies after his election, such as cryptocurrency, fossil energy and banking, have seen a market called the "Trump trade."

The most noisy among them is the crypto asset industry. Not only is the recent trend of Bitcoin showing a correlation with Trump's candidacy, but Trump's moves have also attracted opinion leaders related to crypto assets to participate in public statements and brought market linkage.

First, Bitcoin (BTC) surged after Trump's assassination, with a weekly increase of 10%, sweeping away the previous market haze; then Tesla CEO Elon Mask, who once "called for orders" for Dogecoin, also followed the crypto community and changed to the "Laser Eyes" headset, which is a consensus in the crypto circle. Marc Andreessen, founder of the famous crypto asset venture capital institution a16z, and Ryan Selkis, founder of Messari, and other celebrities in the circle also changed to this avatar to express their support for Trump's crypto-friendly attitude; then,

DMAGA, a token related to the "Laser Eyes" Meme culture, rose more than 50 times in a few hours, and its market value has exceeded 60 million US dollars. ‍

KOLs in the crypto asset industry changed to laser eye avatars

How deep is Trump's relationship with crypto assets?

A report from the Wall Street Journal citing the latest data from the Federal Election Commission (FEC) shows that of the approximately $331 million raised by the Trump campaign last quarter, approximately $3 million was in cryptocurrencies, including BTC, ETH, and Dogecoin.

Recently, Trump has once again signaled his crypto-friendly stance. According to overseas media reports, he will give a speech at the 2024 Bitcoin Conference at the end of July and hold a fundraising event before that.

In addition, in an interview with Bloomberg, Trump also plans to issue a fourth NFT series because the previous NFT series was "very successful" and sold out in one day. "I plan to issue a new series because this is what many people are looking forward to."

The Trump campaign, which calls itself the "crypto president," is deeply "bound" to the crypto asset market. Teong Hng, CEO of Satori Research, pointed out that active trading in the over-the-counter options market indicates that Bitcoin may soon return to its historical highs. He predicts that "there will be a strong rebound at the end of the year, and Trump's victory will be the mark."

FRNT Financial CEO Stephane Ouellette also expressed a similar view, saying that the increasing possibility of Republican candidate Trump being elected president has pushed Bitcoin and other cryptocurrency markets higher. This is because if the Trump administration is re-elected, it will create a more favorable regulatory environment for the cryptocurrency industry.

02 Ethereum co-founder Vitalik sings a different tune ‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍

Now, whether Trump's election can bring another upward trend in the crypto market has become the focus of the crypto community. However, there is a "counter-tune" in the midst of enthusiastic support.

On July 18, Vitalik Buterin, co-founder of the Ethereum network, wrote that he opposed making political voting choices based on whether he supports cryptocurrencies, because candidates are now cryptocurrency-friendly, which does not mean that they will still be so in five years.

Vitalik opposes voting politically based on whether or not to support cryptocurrency

Vitalik wrote pointedly in the article, "If you find that a politician is friendly to cryptocurrency, one thing you can do is check what they thought of cryptocurrency itself five years ago."

This is simply "implying" Trump five years ago, when he was the President of the United States, but held a negative view on crypto assets.

In 2019, Trump tweeted, "I am not a fan of Bitcoin and other cryptocurrencies. They are not currencies, and their value is highly volatile and based on air. Unregulated crypto assets can facilitate illegal behavior, including drug trafficking and other illegal activities."

In 2021, Trump said in an interview with Fox Business Channel that Bitcoin is a scam against the US dollar and would not be surprised if it fell below 6,000 US dollars.

As a result, Trump slapped himself in the face five years later, posing a crypto-friendly gesture and criticizing the Biden administration's tough stance on crypto assets.

Adam Cochran, partner of Cinneamhain Ventures, also believes that Trump's promises to win votes are very unreliable. He pointed out that "Trump has a decades-long history of reselling" and "selling out others for his own benefit." An analysis from the fact-checking website PolitiFact said that more than half of the 102 promises made by Trump during the 2016 presidential campaign have been broken by himself.

Some people believe that even if Trump is re-elected and fulfills his promise, the crypto asset market has become increasingly related to the US stock market, which means that the Fed's interest rate policy will affect the market. So, how much impact can Trump's election as US President have on the Fed's decision-making?

In July this year, on the eve of the first debate of the general election, Trump stated in an interview with the media that he would not let Powell serve as Fed Chairman for the third time, but would let him complete his second term. At the same time, he said that the Fed should avoid cutting interest rates before the November election to avoid boosting the economy during Biden's term.

The Republican Party represented by Trump is more inclined to loose financial policies. During his tenure, Trump has repeatedly bombarded the Federal Reserve and asked Federal Reserve Chairman Powell to stop raising interest rates and cut interest rates immediately. Recently during the campaign, Trump also revealed his economic views, emphasizing that Trump economics = low interest rates + low tax rates.

In fact, the Federal Reserve is an independent entity in the US government system, and its independence emphasizes that it is not influenced by politics. The US President has no right to appoint or dismiss the Chairman of the Federal Reserve. In addition, government policies depend largely on Congress.

According to Wolfe Research, the biggest policy changes in the past 15 years have all occurred when the House and Senate and the White House are controlled by the same party. Without Republican control of both houses, Democrats can set up "roadblocks" in Trump's agenda.

How long will Trump's "binding" to cryptocurrency last? In the short term, before the results of the US election in November, Trump's position, behavior, and voter support will still have an impact on the crypto asset market, and after the election "boots land", the "Trump trade" is likely to weaken.