The Political Gamble of Cryptocurrency: Insights from Candidate Tokens in the 2024 U.S. Election

I. Background

Due to macroeconomic developments and the maturation of Bitcoin as an asset, public interest in Bitcoin is continuously increasing. In the past six months, factors such as geopolitical tensions, inflationary pressures, and risks associated with the dollar have driven voters' attention to Bitcoin. Additionally, inflation has become the primary issue in this election, and assets like Bitcoin, which have a transparent supply mechanism and a hard cap, may possess potential value. In the context of increasing economic uncertainty, these characteristics of Bitcoin seem to provide investors with a hedge against risk.

The Harris Poll results released by the Grayscale team further confirm this trend. The survey shows that significant events such as the approval of the U.S. spot Bitcoin ETF in January 2024 and the Bitcoin halving in April 2024 have significantly increased voters' interest in investing in Bitcoin and other crypto assets (18% and 20%, respectively). Notably, the approval of the Bitcoin ETF has sparked a stronger interest in investing in Bitcoin or crypto assets among 9% of retired voters, a particularly striking figure within the retirement demographic.

Therefore, compared to previous elections, the connection between the upcoming U.S. election and cryptocurrencies is tighter. We can foresee that cryptocurrency policy is likely to become an important part of candidates' campaign platforms, influencing voters' voting preferences. This also means that the crypto industry may face increased regulatory scrutiny and policy debates. In this context, closely monitoring candidates' attitudes and policy proposals regarding cryptocurrencies is not only significant for investors but may also mark a pivotal turning point for cryptocurrencies moving from the margins to the center stage.

II. Overview of U.S. Election Candidates

A. Harris Camp

On July 21, Biden withdrew from the race and endorsed Vice President Kamala Harris, who announced her candidacy for the Democratic presidential nomination. As the current Vice President of the United States, Kamala Harris officially declared her candidacy for the 2024 Democratic presidential nomination. As a descendant of Indian and Jamaican immigrants, if Harris succeeds in securing the nomination, she will become the first Black woman and Asian American to lead a major party's campaign. Harris's political career has primarily developed in the San Francisco Bay Area, where she has served as a U.S. Senator, California Attorney General, and San Francisco District Attorney. She gained prominence in congressional hearings for her sharp prosecutorial questioning style, particularly in confrontations with Trump administration officials.

Image Source: Getty Images

Harris's parents are immigrants from India and Jamaica, and she grew up in Oakland, spending most of her political career in the San Francisco Bay Area.

Harris's first campaign speech provided some insights into her priorities. Like Biden, she intends to contrast her vision for America with that of Trump. She stated that the future path will focus on elevating the status of American workers and the middle class, enabling them to join unions, retire with dignity, live without fear of gun violence, and access affordable healthcare.

1) Current Cryptocurrency Policy Position

Although the Biden administration, to which Harris belongs, has faced criticism from the industry for its perceived anti-cryptocurrency stance, recent developments indicate that the Democratic camp may be adjusting its attitude toward cryptocurrencies:

• Future Forward USA PAC, a major source of support for Harris, has partnered with Coinbase Commerce to accept cryptocurrency donations.

• While Harris's campaign currently does not directly accept cryptocurrency donations, this move may suggest that the Democratic Party is reevaluating its cryptocurrency strategy.

This development may be a response to Republican opponent Donald Trump's advantage among cryptocurrency supporters.

2) Potential Policy Changes

Based on the current situation, we can speculate that the Harris camp may have the following changes in cryptocurrency policy:

• Gradual Openness: Considering the actions of Future Forward USA PAC, Harris may adopt a more open stance on cryptocurrency policy to attract young voters and supporters from the tech industry.

• Balanced Regulation: A balanced regulatory framework may be proposed to protect investor interests without stifling innovation. This could include clear cryptocurrency classifications and tax guidelines.

• International Competitiveness: Given global trends in cryptocurrency development, Harris may propose policies to ensure that the U.S. maintains a leading position in this field.

• Environmental Concerns: In light of the Democratic Party's environmental stance, Harris may propose policies encouraging the use of more environmentally friendly cryptocurrency mining and trading technologies.

B. Trump Camp

Donald Trump's camp has once again become a focal point in the 2024 U.S. presidential election. As a former president, Trump announced his candidacy for the 2024 presidential election in November 2022, attempting to become the second president in U.S. history to win two non-consecutive terms.

Trump's political career has been marked by controversy and drama. He continues to deny the results of the 2020 election, insisting that there was fraud, despite a lack of substantial evidence, which also led to the January 6, 2021, Capitol incident. As the only president in U.S. history to be impeached twice by the House of Representatives, Trump faces multiple legal challenges. In May 2024, he was found guilty on all counts in a criminal trial in New York related to hush money, while also facing charges in three other significant cases involving the 2020 election and the handling of classified documents.

Image Source: CNN

Before entering politics, Trump was a successful businessman and media personality. He graduated from the University of Pennsylvania with a bachelor's degree in economics and achieved significant success in the real estate industry. As the host of the reality show "The Apprentice," he was already a household name before entering politics. This unique background adds a distinctive personal color to his political career.

Trump's policy proposals and campaign strategies continue to emphasize the idea of "Making America Great Again." He promises to thoroughly reform the federal government if elected again, particularly targeting what he calls the "deep state." In terms of economic policy, Trump highlights the achievements of his first term, pledging to restore jobs and promote economic growth. He also plans to cut social safety net programs, which could have a significant impact on the existing welfare system. In foreign policy, Trump advocates for "America First" and may continue to adopt unilateralism and trade protectionism. The support base of Trump's camp mainly includes traditional conservatives, working-class voters, and those dissatisfied with the establishment. This controversy also solidifies the loyalty of his core supporters, allowing him to maintain a strong influence within the Republican Party.

Past Term's Attitude Toward Cryptocurrency

Donald Trump has undergone a significant shift in his stance on cryptocurrency policy:

• Early in his White House term: Trump was skeptical of cryptocurrencies, publicly stating in 2019 that he "doesn't like" them, believing they could fuel illegal activities.

• Change in Attitude: Over time, Trump gradually changed his stance and began to actively embrace cryptocurrencies.

• Campaign Strategy: Trump has incorporated cryptocurrency into his 2024 campaign strategy, announcing that he will accept cryptocurrency donations and pledging to make the U.S. the "global cryptocurrency capital."

• Business Interests: The Trump family launched the World Liberty Financial project, a cryptocurrency trading platform, indicating their business interest in this field.

• Policy Proposals: Trump has proposed a series of supportive policies for cryptocurrencies, including creating a Bitcoin "strategic reserve," promoting decentralized finance (DeFi), subsidizing Bitcoin mining to increase energy output, and opposing the creation of central bank digital currencies (CBDC).

III. Analysis of Candidate-Related Tokens

1) Harris Token

The Meme token related to Vice President Kamala Harris, Kamala Harris Token (KAMA), has also performed prominently. KAMA was launched in August 2023, and its name derives from Vice President Harris, although it has no direct association with her.

KAMA token has experienced significant price volatility in the short term. According to CoinGecko data, KAMA surged over 100% within 24 hours, reaching a historical high of $0.03. Historical records show that KAMA's market capitalization once exceeded $30 million, with a 24-hour trading volume surpassing $1 million.

However, as a Meme token, KAMA's value primarily stems from social media hype and speculative behavior rather than actual utility. Compared to other candidate-related tokens, KAMA seems to rely more on short-term market sentiment and speculation rather than long-term value propositions. KAMA's official website claims its goal is "to allow everyone to participate in the future of cryptocurrency," but it does not provide specific use cases or technological innovations.

2) WLF (World Liberty Financial)

The WLF project was founded by Trump's son. Trump himself has been appointed as the project's "Chief Crypto Advocate," while his sons Eric and Donald Jr. serve as "Web3 Ambassadors." The project's technical architecture includes a "credit account system" built on Aave and the Ethereum blockchain, aimed at facilitating decentralized lending. However, it is worth noting that WLF has personnel connections to the DeFi project Dough Finance, which suffered a $2 million hack, raising concerns about the project's security.

According to a draft of the project white paper obtained by CoinDesk, WLF's "governance" cryptocurrency token WIF plans to allocate 70% to "founders, team, and service providers," significantly higher than the internal allocation ratios of other well-known crypto projects. The remaining 30% will be distributed through public sales, with some funds allocated to support project operations. This unusually high internal allocation ratio has raised questions among industry insiders, suggesting it may contradict the project's claim of "returning financial power to the people."

The WIF token is designed to be non-transferable, which may be intended to avoid violating securities laws. However, this feature also limits the token's market liquidity, potentially affecting its future value and utility. The WLF team has stated that the tokenomics plan has not been finalized, leaving room for further adjustments.

IV. Investment Potential Assessment of Candidate Tokens

1) Speculative Opportunities

The election situation undoubtedly has a significant impact on the prices of tokens. As both sides compete, the tokens they represent will also be closely contested. The role of social media and news events is present but not overly significant; they can only influence short-term price fluctuations. Regardless of the political views of either camp, blockchain-related policies will not be implemented quickly, as they are primarily related to vested interests. Each party has many factions behind it, and the implementation of a policy requires a long process; it cannot be achieved casually. Moreover, tokens related to politics are generally dominated by Memecoins, which do not have long-term sustainability.

The investment potential of candidate-related tokens is closely tied to the election dynamics. As the election process progresses, changes in support rates for each candidate are likely to directly affect the price fluctuations of related tokens. In a situation where the two major camps are evenly matched, the tokens they represent may find it difficult to distinguish themselves.

Social media and news events also have some influence on the prices of these tokens, but primarily focus on short-term fluctuations. As for the impact of the winning camp's policy implementation on the future of the tokens, regardless of the political views of either camp, the actual implementation of blockchain-related policies often requires a considerable amount of time. The formulation and execution of policies involve multiple interests and require a complex legislative and approval process, making it unlikely to have an immediate and sustained impact on token prices.

Additionally, politically related tokens are mostly Memecoins, which typically do not have long-term sustainability. Their value relies more on short-term speculation and social media attention rather than actual use cases or technological innovations.

2) Risk Analysis

Market Manipulation Risk

Candidate-related tokens are highly susceptible to market manipulation. First, due to the typically low liquidity of these tokens, large transactions can lead to significant price volatility. Some investors may exploit this for "pump and dump" operations to gain improper benefits. Second, the spread of false information can have a substantial impact on token prices. In the age of social media, rumors or fake news about candidates can spread rapidly, leading to irrational price fluctuations of related tokens. For example, a false report about a candidate's change in policy stance could trigger a significant rise or fall in the related token's price.

V. Conclusion

Candidate-related tokens exhibit dual attributes as tools for political participation and investment products in the context of the 2024 U.S. election. These tokens provide supporters with a new way to express their political views while also presenting investors with high-risk, high-reward speculative opportunities.

At the same time, this phenomenon highlights the urgent need for a more comprehensive regulatory framework and investor protection mechanisms in the cryptocurrency market. In the future, achieving a balance between encouraging innovation and preventing risks will be an important issue for policymakers.