History proves: The imitation season is coming, and the 12 months after the election are still the golden period for the crypto bull market
In the 12 months following the last two elections, the returns of altcoins were about three times that of Bitcoin.Original Title: Republican Victory Ushers in a New Era for Crypto
Author: Kelvin Koh, Spartan Group
Compiled by: 夫如何, Odaily星球日报
The 2024 U.S. presidential election has become one of the most closely watched elections in recent years. Although most people expected the election battle to be exceptionally fierce, the results still surprised many. Not only did Trump win the presidency convincingly, but the Republican Party also gained a majority in both the Senate and the House of Representatives. Such an overwhelming victory will provide the Republican Party with sufficient political leverage to push for multiple reforms in the coming years. The cryptocurrency sector is expected to undergo significant changes, and we believe the next 12 months will be a favorable period for crypto assets.
One notable aspect of the 2024 election is the emergence of a "crypto agenda," with the winning president and his core advisory team holding a friendly attitude towards cryptocurrencies. Cryptocurrency companies have strongly supported Trump and key Republican candidates through donations. Therefore, it is not surprising that the crypto industry has become one of the main beneficiaries of the Republican victory.
There has been much discussion about the implications of this election for the crypto industry, but here are some of the main impacts:
Changes in SEC policies. Under Gary Gensler's leadership, the SEC and other appointed officials of the Biden administration have implemented aggressive regulations on the crypto industry. Despite repeated calls from the industry for regulatory guidance, the SEC has insisted on managing through enforcement actions. During Gensler's tenure, over 2,700 enforcement actions have been initiated, resulting in fines totaling $21 billion. This has made it difficult for many projects to operate in the U.S. Trump explicitly stated during his campaign that if elected, he would replace Gensler. As expected, last week Gensler announced that he would resign as SEC chairman on January 20, 2025. Several candidates have already been nominated to succeed him, and they are generally seen as more supportive of the crypto industry. This means that existing enforcement actions may be withdrawn, and the SEC will adopt a more collaborative regulatory approach.
Improved congressional environment. In the past, a major challenge for the crypto industry has been the difficulty in passing any favorable legislation in the U.S. Congress, as most lawmakers lacked understanding of cryptocurrencies. However, after this election, approximately two-thirds of Congress members are considered pro-crypto. This could lead to a supportive regulatory framework for innovation, making it easier for projects to secure funding and clearing obstacles for institutional capital to enter the crypto space.
Proposal for a strategic Bitcoin reserve. During the campaign, Trump indicated to his crypto supporters that if elected, he would push for the establishment of a strategic Bitcoin reserve, rather than allowing the U.S. government to continue disposing of previously seized Bitcoins. This proposal quickly gained attention after the election. If realized, the market will begin to speculate whether this means the U.S. government will become a net buyer of Bitcoin rather than a seller. If MicroStrategy alone can influence Bitcoin prices, imagine the impact of the U.S. government establishing a strategic Bitcoin reserve. More importantly, how will other countries respond? Will they propose similar plans?
Support for DeFi. Even before the election, a team supported by Trump launched World Liberty Financial in September 2024, aimed at providing decentralized lending services and governance through the native token WLF. The project has raised over $50 million to date, with the latest investment coming from crypto entrepreneur Justin Sun, who invested $30 million this week. WLF plans to raise a total of $300 million. Regardless of whether it ultimately raises $300 million or $50 million, the significance of this project far exceeds its monetary value—it provides great encouragement for DeFi developers and innovators. More importantly, this DeFi project supported by the incoming U.S. president will have a profound impact on the entire industry.
Each of the above events is significant enough to drive notable momentum in the crypto market, and the combination of these events will have an even more profound impact on the crypto industry. The market has yet to fully reflect the potential implications of these changes, which is why the U.S. media refers to this period as the "golden age of crypto."
In addition to all of the above, Trump has expressed a desire to make the U.S. the "global crypto capital." To some extent, the U.S. is already the de facto leader in crypto. Many major infrastructure projects, some of the largest blockchain infrastructure companies, and decentralized applications originated in the U.S. The U.S. also has the world's largest licensed cryptocurrency exchange, the largest crypto investment bank, and the largest Web3 venture capital pool. Furthermore, the U.S. accounts for about 40% of global Bitcoin mining power (compared to 17% in 2021), becoming the largest center for Bitcoin mining, partly due to policy changes in China. Most global crypto transactions are also denominated in U.S. dollars, and major stablecoins are pegged to the dollar. Therefore, the U.S. is already the global crypto hub in many ways. However, if the U.S. government plans to consolidate or further expand its dominance, what does this mean for other governments, especially major financial centers like London, Tokyo, Dubai, and Hong Kong? More importantly, can Europe afford to miss out on the Web3 innovation era, falling behind once again after the Web2 era?
Some may question whether Trump will truly deliver on these promises, but I believe the likelihood of fulfillment is high. Trump does not follow traditional rules, and the political leverage gained from this election victory is very strong. Additionally, Trump has two crypto-native advisors—Elon Musk and JD Vance. The new Secretary of Commerce, Howard Lutnick, also serves as Chairman and CEO of Cantor Fitzgerald, which has just acquired a 5% stake in Tether (the issuer of the world's largest stablecoin USDT). Coupled with a more crypto-friendly Congress, pushing these initiatives should not be difficult.
Historical Data: Cryptocurrency Prices Perform Strongly in the 12 Months Following U.S. Elections, Altcoins Outperform Bitcoin
In this context, discussing the impact of all this on crypto asset prices becomes particularly important. From the table below, it can be seen that historically, the 12 months following U.S. elections have typically been a strong period for crypto asset prices.
Here are two main observations:
Regardless of who wins the presidential election and the interest rate environment, crypto assets have performed exceptionally well in the 12 months following U.S. elections. We attribute this to two factors:
a) The clarity brought by the election results and the optimism towards the new government;
b) The ongoing momentum of the Bitcoin halving cycle/crypto cycle.In the 12 months following the last two elections, the returns of altcoins (represented by ETH) were about three times that of Bitcoin.
As of 30 days after the 2024 election, Bitcoin has risen by 46%, and Ethereum has risen by 58%. We believe there is still significant upside potential in the next 11 months.
To better understand the opportunities for altcoins, let’s look at the following chart, which shows the performance of altcoins relative to Bitcoin. It can be seen that there are phases within the cycle where altcoins significantly outperform Bitcoin. We refer to these phases as "altcoin cycles" or "altcoin seasons." The most recent major altcoin cycle occurred in January 2021 and peaked in November 2021. The previous cycle began in February 2017 and peaked in January 2018.
It is noteworthy that these altcoin cycles roughly overlap with the 12-month period following elections. We believe the main reason is the strong price performance and shift in investor sentiment towards risk appetite in the initial weeks after the election. Additionally, this trend attracts retail capital into the crypto asset class, as retail investors often prefer higher-risk small and mid-cap tokens, which are less affected by institutional investor liquidity constraints. Furthermore, during this time in the cycle, altcoins often underperform, making their risk-return profile more attractive compared to large-cap tokens. This is also the case in the current cycle.
If this historical relationship holds, then we should expect an altcoin season to begin soon.
