The U.S. Election and Bitcoin: The Changing Landscape Under Legal Intertwining
The impact of the U.S. election on the form of Bitcoin remains a major focus for the market, with investors, policymakers, and industry participants closely monitoring the election results and subsequent policy directions to assess the future development of the Bitcoin market.Current Status of the Bitcoin Market on the Eve of the U.S. Election
The voting for the 2024 U.S. presidential election is scheduled for November 5, with the results expected to be known around noon Beijing time on November 6. Democratic Vice President Kamala Harris and former Republican President Donald Trump are in the final sprint. As a globally watched political event, the approaching date of the U.S. election has had a significant impact on the Bitcoin market, leading to severe price fluctuations. With the election campaign heating up, Bernstein analysts predict that if Trump wins, Bitcoin could rise to between $80,000 and $90,000. Market analyst Miles Deutscher believes that regardless of who wins the U.S. presidential election, Bitcoin could reach $100,000, but if Harris is elected, it could lead to an immediate sell-off in the Bitcoin market.
I. The Trump Family's Cryptocurrency Project
(1) Project Launch and Fundraising Challenges
Recently, the Trump family's decentralized finance (DeFi) project, World Liberty Financial (WLF), was officially launched. Prior to this, the project underwent nearly two months of promotional buildup, with family members frequently promoting it in an attempt to attract investors using Trump's influence. However, the token sales for the project have not been ideal.
According to information from the official website, the price of one WLFI token is $0.015, and purchases can be made using ETH, USDT, USDC, or WETH. On-chain data indicates that approximately 344 million WLFI tokens were sold within the first hour of public sales, with buyers from about 3,000 independent wallets.
However, to date, the total sales of WLFI tokens have not reached 1 billion, accounting for less than 5% of the 20 billion tokens available for public sale, far below the $300 million fundraising target. For example, according to FX168 Financial News, only about 4% of the WLFI tokens were sold in the public sale, amounting to $12.45 million, which is a significant shortfall from the $300 million target.
The poor sales performance of the token can be attributed to several factors, including website technical issues, investment thresholds, and an incomplete business plan. The token sale for the project follows Regulation D, which restricts the scale of sales and is only available to accredited investors, and the tokens cannot be resold, which are also reasons for the poor sales performance.
(2) Controversy Over the Nature of the Project
Many industry experts believe that the project is essentially a means for Trump to expand his fundraising channels for his campaign. According to official project documents, the Trump family has authorized the use of its image for WLF's promotion and is entitled to receive up to 75% of the project's net income.
After deducting operational costs and an initial reserve of $30 million, 75% of the remaining net income will belong to DT Marks DEFI LLC, a company under the Trump family, with no responsibility for WLF. In addition to net income, the Trump family will also receive 2.25 billion WLFI tokens, valued at approximately $337.5 million at the issuance price.
This high percentage of profit distribution may involve conflicts of interest, as Trump's business interests and political power are under close scrutiny as a presidential candidate. Given the criticism of the crypto market for its lack of transparency, any involvement of foreign forces could have a significant impact on Trump's campaign.
Additionally, the restrictions on the token sale may involve securities law issues. WLF emphasizes that WLFI token sales are limited to accredited investors or non-residents in the U.S. to avoid violating U.S. securities laws. However, these restrictions have also raised questions about the project's legitimacy.
II. The Impact of the Election on the Cryptocurrency Market
(1) The Impact of Candidates' Policy Positions
Mr. Trump touts himself as the "crypto president" and has publicly promised to make the U.S. the "global cryptocurrency capital," showing a positive attitude towards the cryptocurrency market. This stance has attracted the attention of some investors who anticipate that Trump's policies could promote the development of the cryptocurrency market and bring more opportunities to the industry.
For example, Bill Zanker, founder of The Learning Annex, proposed to Trump the idea of converting his comic artwork into non-fungible tokens (NFTs) for sale, which sparked Trump's interest in cryptocurrency.
Trump also became the first U.S. presidential candidate to accept cryptocurrency donations, with twin brothers Cameron and Tyler Winklevoss, who became billionaires from investing in Bitcoin, pledging to donate $1 million worth of Bitcoin to Trump's campaign. Tesla's CEO Elon Musk, a supporter of Dogecoin, also joined Trump's cryptocurrency advisory team.
Although Harris is not as direct as Trump in her stance on cryptocurrency, she has also pledged to support the establishment of a regulatory framework for cryptocurrencies. Harris's plan aims to ensure that digital asset owners can benefit from a reasonable regulatory framework and protect African American men and other groups participating in this market.
This commitment has boosted investor optimism, with Bitcoin's price reaching a two-week high. However, some argue that Harris's cryptocurrency policy is not as strong as Trump's.
Noelle Acheson, author of the newsletter "Crypto is Macro Now," stated, "This rise is primarily driven by the election, initially stemming from Trump's lead in prediction markets and polls, and subsequently from Harris's campaign team's semi-supportive statements regarding the crypto market."
Galaxy Research also pointed out that Harris's attitude towards cryptocurrency is friendlier than that of current President Joe Biden, but there remains a significant gap compared to her competitor Donald Trump.
(2) Monetary Policy and Market Response
During the U.S. election period, adjustments in monetary policy are closely related to the cryptocurrency market. The Federal Reserve's interest rate policies and monetary easing measures are typically important topics during elections, and these policies are closely linked to the cryptocurrency market.
Cryptocurrency prices, especially Bitcoin and Ethereum, usually benefit from loose monetary policies, as low interest rates and a relaxed credit environment attract more funds into risk assets. If the election results suggest that the new government may adopt more monetary stimulus policies or continue the trend of interest rate cuts, it could further increase investment demand in the cryptocurrency market.
Market sentiment fluctuations dominate short- to medium-term price volatility. During the campaign, investors are eager to see candidates' policy positions and future regulatory trends while also keeping an eye on adjustments in macroeconomic policies. This uncertainty leads to significant fluctuations in market sentiment, which in turn affects the short- to medium-term volatility of cryptocurrency prices.
For example, during the campaigns of Trump and Harris, Bitcoin's price experienced severe fluctuations. Data shows that Bitcoin's price fluctuated by as much as 20% over the past month. In the last 24 hours, nearly 50,000 trading positions were forcibly liquidated, totaling $123 million. This indicates that the impact of market sentiment fluctuations on the cryptocurrency market cannot be ignored.
III. The Impact of Regulations on the Election and Bitcoin
(1) Challenges of Anti-Money Laundering Laws
The Biden administration's stance on the anti-money laundering laws regarding Bitcoin established by the Trump administration has not been clearly defined. The anti-money laundering regulations introduced by the Trump administration at the end of its term require financial service institutions to disclose the identity information of cryptocurrency holders and mandate that when customers transfer virtual currencies worth at least $10,000 to non-exchange custodial wallets, relevant documents must be submitted to the Treasury;
At the same time, banks and exchanges are required to retain customer records for sending virtual currencies worth $3,000 or more to non-custodial wallets. The purpose of these regulations is to curb the use of cryptocurrencies for illegal fund transfers.
However, these regulations have faced strong opposition. Major institutions, including Fidelity Investments and the U.S. Chamber of Commerce, are actively lobbying to prevent the implementation of the new regulations. Republican lawmakers such as Cynthia Lummis, Tom Cotton, and Tulsi Gabbard have also expressed their opposition. Trade groups supporting cryptocurrencies have even threatened legal action.
If the next administration decides to continue pushing these regulations, it could have a significant impact on the Bitcoin market. The costs of crypto services may rise, and some cryptocurrencies may even face the risk of disappearing. According to Bloomberg, this could lead to a significant drop in cryptocurrency prices.
(2) Advancement of Digital Asset Legislation
On the eve of the 2024 presidential election, the "Digital Asset Market Structure Bill" concerning digital currencies has attracted widespread attention. The draft of this bill includes several key issues, and given the approaching election and increasing partisan divisions, the difficulty of passing the bill will increase, making it particularly important to complete the legislative work before the election.
The draft of the bill is divided into four main parts:
Definitions of various important terms, as well as requirements for the SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission) to jointly formulate rules and a temporary registration system.
Exemption provisions for digital assets: If a digital asset meets certain conditions, it may be exempt from current securities laws, providing issuers with a buffer period to develop projects. At the same time, a new disclosure mechanism will be established, and issuers can also apply for decentralized certification, increasing the likelihood of being recognized as commodities.
Registration requirements for digital asset intermediaries with the SEC and CFTC: Payment stablecoins and commodity-like digital assets do not need to register with the SEC, while the CFTC will gain regulatory authority over the spot market for digital commodities, such as Bitcoin and Ethereum, and trading platforms must register with the CFTC and SEC.
Both the SEC and CFTC must establish new branches to support technological innovation: The SEC will establish an Innovation Fintech Strategic Center, and the CFTC will set up a CFTC Lab, with both agencies jointly establishing a Digital Asset Advisory Committee.
Although House member Bernie Sanders has reservations about digital assets, he believes the U.S. needs a bill on digital assets to prevent a recurrence of incidents like FTX. (FTX is one of the world's largest cryptocurrency exchanges. In November 2022, FTX triggered panic due to asset issues and subsequently filed for bankruptcy. Founder SBF faces multiple charges, including financial fraud, which is considered one of the largest financial fraud cases in U.S. history.)
Sanders expressed concerns that the draft may favor the CFTC and potentially weaken the SEC's authority, and thus wrote to the SEC chair and U.S. Treasury Secretary Yellen to inquire about the draft's impact and offer suggestions.
The process of passing this bill may take several months, potentially extending into the period after the 2024 U.S. presidential election.
IV. Conclusion and Outlook
The legal implications of the U.S. election and Bitcoin present a complex and multifaceted picture.
The differing positions of Trump and Harris on cryptocurrency, along with the political forces and interests behind them, bring different expectations for the Bitcoin market.
Trump's positive attitude towards cryptocurrency, while attracting investor attention to some extent, has also raised questions about conflicts of interest and legitimacy. Harris's proposed regulatory framework, although relatively conservative, provides a certain direction for the stable development of the market.
In terms of legal regulations, the challenges posed by anti-money laundering laws and the advancement of digital asset legislation will have significant impacts on the Bitcoin market. The Biden administration's unclear stance on the Trump administration's anti-money laundering rules creates uncertainty in the market. While the introduction of the digital asset bill provides some regulation and guidance for the market, it also faces partisan divisions and a complex legislative process, leaving the future process uncertain.
However, despite the many uncertainties, the impact of the U.S. election on Bitcoin remains a focal point for the market. Investors, policymakers, and industry participants are closely monitoring the election results and subsequent policy directions to assess the future development of the Bitcoin market.
Looking ahead to the near future after the election, if the new administration adopts more proactive cryptocurrency policies, it could drive the development of the Bitcoin market, attracting more investment and innovation. Conversely, if the government strengthens regulatory measures, it may exert some pressure on the market but could also help regulate market order and protect investor interests.
Furthermore, the post-election stance of the U.S. will also influence the regulatory attitudes of countries around the world towards Bitcoin and cryptocurrencies. As the cryptocurrency market continues to evolve, international cooperation and coordination will become increasingly important to avoid regulatory arbitrage and market instability.
Regardless of the outcome of the U.S. election, I solemnly remind everyone to closely monitor policy changes and implement risk control measures to cope with potential market fluctuations. Only by remaining adaptable can one maintain an undefeated position.
