Why Trump's Presidency Is Good for Cryptocurrency

Author: Juan Aranovich Source: unchainedcrypto Translation: Shan Ouba, Golden Finance

The "Trump trade" has been a focus of investors since former President Donald Trump became the Republican candidate in the upcoming US election. But the assassination of Trump during a rally last Saturday, when a bullet grazed his right ear, has made the trade more prominent.

Traders at prediction market Polymarket are now predicting a 70% chance of Trump defeating Joe Biden, compared to a 60% chance before the assassination. In the latest Bits + Bips podcast, hosts Alex Kruger and Joe McCann said they believe Trump's victory is now a foregone conclusion after the heroic image of the former president was shown during the shooting. McCann said, “The narrative and the perception of what he can do is very influential to the price of [cryptocurrency].”

The “Trump trade” refers to market reactions and investment strategies based on the expectation that Trump’s presidency will bring favorable conditions for certain assets, especially cryptocurrencies, due to his pro-crypto stance and potential economic policies.

Trump as a Crypto Candidate

After previously criticizing cryptocurrencies, Trump has positioned himself as a crypto candidate. In May, he became the first major presidential candidate in U.S. history to accept a cryptocurrency donation. He is scheduled to speak at a Bitcoin conference in Nashville next week. In an interview with Bloomberg on Tuesday, Trump emphasized the need for the United States to take the lead in the cryptocurrency field ahead of China and hinted at the launch of a fourth NFT.

In addition, Trump has selected Ohio Senator JD Vance as his running mate. Vance revealed that he owns between $100,001 and $250,000 worth of BTC in 2022, and he has been outspoken against Gary Gensler’s regulatory approach to the cryptocurrency industry. As a result, James Seyffart said on Bits + Bips that Vance “might be a good fit for crypto.”

With Trump in the White House, the hostile regulatory environment for crypto in the United States is expected to change. Gensler’s SEC has been strongly opposed to the industry, enforcing regulation primarily through enforcement. A Trump administration could bring more regulatory clarity and allow for more innovation. For example, some expect the Solana ETF to be approved during his presidency, following the lead of Bitcoin and Ethereum.  

Macroeconomics Under Trump’s Presidency

But there’s more than just Trump’s pro-crypto views behind crypto investors’ optimism about a second term as president. Trump is likely to shape the macroeconomic environment in a way that favors cryptocurrencies.

As Krueger mentioned in the podcast and noted on X, Trump’s fiscal policies, including tax cuts and increased government spending, could lead to higher inflation and a steeper yield curve. This environment tends to make cryptocurrencies more attractive as alternative investments. Billionaire investor Mark Cuban echoed this sentiment on X on Wednesday, saying that “lower taxes and tariffs are going to be inflationary,” which could push the price of Bitcoin “far higher than you think.”

More specifically, a Trump-Vance administration could alter U.S. economic policy around a strong dollar. Both Trump and his running mate believe that a weaker dollar would better support U.S. exports, making them more competitive globally. This position stands in stark contrast to the Republican Party’s traditional support for a strong dollar. 

A weaker dollar could boost domestic manufacturing and the trade balance, but it could also lead to increased inflationary pressures. This would be a positive development for the cryptocurrency market, as investors often use Bitcoin and other cryptocurrencies as a hedge against currency devaluation. As Cuban noted in his post, "Geopolitical uncertainty and the decline of the U.S. dollar as a reserve currency could accelerate gains in Bitcoin prices."

The U.S. Dollar Index (DXY) measures the value of the greenback against a basket of other major currencies, and historically has moved in the opposite direction of Bitcoin and the broader market. When the DXY falls, it signals a weaker greenback, and Bitcoin typically rises as investors seek alternatives to traditional fiat currencies.