How long can the "Trump trade" in the cryptocurrency market last?

Trump Doubles Down on "Crypto-Friendly" Stance

On July 21, Biden announced in an "open letter" that he would no longer seek re-election and would withdraw from the presidential race. Soon, support for Trump surged, and combined with the positive image from the assassination attempt, the probability of his victory increased significantly. Data from the decentralized prediction platform Polymarket shows that Trump's support rate for winning the 2024 election is as high as 61%, far exceeding the 37% support for the second-place candidate, Kamala Harris.

Wall Street investors believe that Trump has a strong chance of returning to the presidency. Industries that may benefit from Trump's policies after his election, such as cryptocurrencies, fossil fuels, and banking, have seen what is referred to as the "Trump trade."

The most vocal among these is the cryptocurrency industry, where Bitcoin's recent trajectory has shown a correlation with Trump's campaign movements. Trump's actions have also attracted opinion leaders related to cryptocurrencies to publicly express their support, leading to market interactions.

First, Bitcoin (BTC) surged following the assassination attempt, with a weekly increase of 10%, clearing the previous market gloom. Then, Tesla CEO Elon Musk, who previously promoted Dogecoin, adopted the "laser eyes" profile picture, a consensus symbol in the crypto community, while notable figures in the crypto venture capital space, such as a16z founder Marc Andreessen and Messari founder Ryan Selkis, also changed their avatars to express support for Trump's crypto-friendly stance. Subsequently, the token DMAGA, related to the "laser eyes" meme culture, surged over 50 times in just a few hours, with its market cap exceeding $60 million.

Crypto industry KOLs adopt laser eyes profile picture

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 out of approximately $331 million raised by Trump's campaign team last quarter, about $3 million came from cryptocurrencies, including BTC, ETH, and Dogecoin.

Recently, Trump has again signaled his crypto-friendly stance. According to overseas media reports, he will speak at the Bitcoin conference at the end of July 2024 and will hold a fundraising event beforehand.

Additionally, in an interview with Bloomberg, Trump announced plans to release a fourth NFT series, as the previous series was "very successful," selling out in a day. "I plan to release a new series because many people are looking forward to it."

Self-proclaimed "crypto president" Trump's campaign has become deeply "bound" to the cryptocurrency market. Teong Hng, CEO of Satori Research, pointed out that the active trading in the over-the-counter options market indicates that Bitcoin may soon return to historical highs, predicting "a strong rebound will occur by the end of the year, and Trump's victory will mark it."

Stephane Ouellette, CEO of FRNT Financial, expressed a similar view, believing that the likelihood of Republican candidate Trump becoming president is increasing, which is driving up the Bitcoin and other cryptocurrency markets. This is because if Trump’s government is re-elected, it will create a more favorable regulatory environment for the cryptocurrency industry.

Ethereum Co-Founder Vitalik Voices Opposition

Now, whether Trump's election can bring about another upswing in the crypto market has become a focal point of interest in the crypto community. However, amidst the enthusiastic support, there is a "contrary tune."

On July 18, Vitalik Buterin, co-founder of the Ethereum network, stated that he opposes making political voting choices based on whether a candidate supports crypto, as a candidate's current friendliness towards cryptocurrencies does not guarantee they will remain so in five years.

Vitalik opposes using support for cryptocurrencies as a basis for political voting

In his article, Vitalik subtly suggested, "If you find a politician friendly towards cryptocurrencies, one thing you can do is check their views on cryptocurrencies from five years ago."

This is a clear reference to Trump five years ago when he was the President of the United States but held a dismissive view towards crypto assets.

In 2019, Trump tweeted, "I am not a fan of Bitcoin and other cryptocurrencies. They are not currencies, their value is highly volatile and based on nothing. Unregulated crypto assets can facilitate illegal activities, including drug trafficking and other illegal activities."

In 2021, Trump again stated in an interview with Fox Business that Bitcoin is a scam against the dollar and that he would not be surprised if it fell below $6,000.

As a result, five years later, Trump contradicted himself, adopting a crypto-friendly stance and criticizing the Biden administration's tough position on crypto assets.

Adam Cochran, a partner at Cinneamhain Ventures, also believes that Trump's promises to rally votes are highly unreliable. He pointed out that "Trump has a long history of flipping" and "selling others out for his own benefit." An analysis from the fact-checking site PolitiFact states that more than half of the 102 promises Trump made during his 2016 presidential campaign have already been broken by him.

Some opinions suggest that even if Trump is re-elected and fulfills his promises, the cryptocurrency market is increasingly correlated with the U.S. stock market, meaning that the Federal Reserve's interest rate policies will impact the market. So, how much influence can Trump's election as President of the United States have on the Federal Reserve's decisions?

In July of this year, on the eve of the first debate of the election, Trump stated in a media interview that he would not allow Powell to serve a third term as Federal Reserve Chairman but would let him complete his second term. He also stated that the Federal Reserve should avoid lowering interest rates before the November election to prevent boosting the economy during Biden's term.

The Republican Party, represented by Trump, tends to favor loose monetary policies. During his presidency, Trump repeatedly criticized the Federal Reserve, demanding that Chairman Powell stop raising interest rates and cut them immediately. Recently, during the campaign, Trump also revealed his economic views, emphasizing that Trump economics equals low interest rates + low taxes.

In reality, the Federal Reserve operates independently within the U.S. government system, emphasizing its independence from political influence. The U.S. President does not have the authority to appoint or dismiss the Federal Reserve Chairman, and government policies largely depend on Congress.

According to data from Wolfe Research, the biggest policy changes over the past 15 years have occurred when both the House and Senate and the White House are controlled by the same party. If the Republicans do not control both chambers, Democrats can set "roadblocks" in Trump's agenda.

How long will Trump's "binding" with cryptocurrencies last? In the short term, before the results of the November U.S. election are announced, Trump's stance, actions, and voter support will continue to impact the cryptocurrency market. However, after the "shoe drops" from the election, the "Trump trade" is likely to weaken.

Tracking Events Related to "Crypto Voters" in the U.S. Election

Continuously track the emerging voting power of crypto voters, analyze their dynamics and potential impact on elections, as well as the effects of the U.S. elections and future U.S. political landscape on the cryptocurrency market.

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