[US Presidential Election and Crypto] ① Trump or Biden... Virtual Asset Market Stirs

Republican Pro-Blockchain Stance
2017 Bull Market Revival Uncertain
Claims Interest Rates Impact More Than Policy

"Because the virtual asset policy stances of the Democratic and Republican parties differ, the outcome of the U.S. presidential election could have a certain impact on the virtual asset market, including Bitcoin."

As the U.S. presidential election approaches, the virtual asset industry is paying close attention. This is because the policy stance on virtual assets could change depending on the result. The current ruling party, the Democratic Party, tends to emphasize regulation of virtual assets. On the other hand, the Republican Party is more favorable toward the virtual asset industry. Therefore, there is an expectation that if the Republicans come to power, virtual asset regulations could be relatively eased. This is why both domestic and international virtual asset industries are interested in the U.S. presidential election outcome.

Pro-Cryptocurrency Trump... "Regulations Will Ease if Republicans Win"

The virtual asset industry is particularly focused on the Republican presidential primary. This is because former President Donald Trump, a leading candidate, is a politician favorable to virtual assets. He is known to hold virtual assets totaling $2.6 million, including Ethereum worth $755,000 and Wrapped Ethereum worth $731,000. Notably, at the end of last year, he attracted attention by selling an NFT collection called the 'Mugshot Edition' for 0.1 Ethereum. The CEO of a virtual asset exchange said, "I am not necessarily a supporter of the U.S. Republican Party, but there is a strong perception that if Trump is nominated and wins the presidential election, it would be very positive for the industry," adding, "At least there is an expectation that virtual asset regulations will not be imposed."

This expectation is grounded. The Republican Party also generally shows support for virtual assets. According to Coinbase's nonprofit organization 'Stand With Crypto,' at least 18 U.S. senators support virtual assets. Among these supporters, 14 are Republican senators. Republican Senators Cynthia Lummis and Ted Cruz are well-known politicians who publicly support Bitcoin.

Gary Gensler SEC Chairman
Photo by Reuters Yonhap News

On the other hand, the Democratic Party supports 'regulation.' Senator Elizabeth Warren and Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), are representative figures. Senator Elizabeth Warren criticized the SEC last month after it approved a spot Bitcoin exchange-traded fund (ETF), stating on her X (formerly Twitter), "The SEC made the wrong decision on the Bitcoin ETF. It is urgent that virtual assets comply with anti-money laundering rules."

Chairman Gary Gensler also issued a statement saying, "I do not support Bitcoin," even while approving the spot Bitcoin ETF. President Joe Biden, who appointed Chairman Gensler, has also issued five statements opposing virtual assets.

The virtual asset research firm Messari analyzed in its 'Virtual Asset Investment Themes' report that "Republican control in the 2024 election would be favorable for the coin industry." This highlights that virtual asset policies in the U.S. have partisan characteristics.

Jeong Seok-moon, head of the Kobit Research Center, said, "Since the stances of the Democratic and Republican parties differ, who becomes the next ruling party will have some influence on the development of the blockchain industry and price trends in the U.S.," adding, "Since U.S. companies have shown strength in Bitcoin mining after China’s complete ban on Bitcoin mining, the U.S. presidential election could have a certain impact on Bitcoin as well."

Interest Rate Cuts Expected This Year? ... Positive Momentum if Republicans Win

With former President Trump entering the Republican presidential primary this year, the virtual asset market is also enjoying a kind of halo effect. This is because Bitcoin recorded the third-highest annual return (1330%) during his tenure.

How much did Bitcoin’s price increase during Trump’s presidency? Looking at the annual prices, Bitcoin rose 126% from $429 (January) to $970 (December) in 2016, before Trump took office. During Trump’s term (January 2017 to January 2021), Bitcoin’s price surged 2887%, from $970 to $28,976.

Annual Bitcoin returns during his tenure were 1330% in 2017, -73% in 2018, 94% in 2019, 304% in 2020, and 59% in 2021. It was not a consistent rise every year. The high growth in 2017 was driven by 'demand,' while in 2020, 'interest rates' were credited with pushing prices up.

Some argue that factors such as demand, interest rates, and halving events are bigger variables than the U.S. presidential election outcome. The main cause of Bitcoin’s price rise in 2017 was Chinese demand. At that time, 80% of the mining market was controlled by Chinese entities. When demand for Bitcoin mining machines exceeded supply by three times and electricity consumption surged, the Chinese government banned mining.

2020, which recorded the second-highest annual increase during Trump’s tenure, was the year the COVID-19 pandemic occurred. The Federal Reserve (Fed) lowered the benchmark interest rate to near 0%, causing a surge in dollar liquidity, which led to simultaneous price increases in real estate, stocks, and coins, overheating the market.

The expectation of interest rate cuts, along with the election, is interpreted as a background for the anticipated rise in virtual asset prices this year. Hashed Open Research analyzed, "Considering wage growth and raw material price trends, the U.S. consumer price inflation rate is expected to gradually slow to the high 2% range in 2024," adding, "The possibility of interest rate cuts from the second half of the year is open, so along with the election schedule, a price increase across virtual assets is expected."

Additionally, the Bitcoin halving scheduled for April 2024 is cited as a factor that will drive Bitcoin price increases. While the amount of newly supplied Bitcoin will be halved, the approval of Bitcoin exchange-traded products (ETPs) by the SEC in January has increased institutional net purchases of Bitcoin. Despite Bitcoin sales by the Grayscale fund, net weekly inflows turned positive from February due to increased purchases by other institutions.