From CoinShares Research Blog by James Butterfill

With Donald Trump securing the presidency, significant changes are expected across various sectors, particularly for Bitcoin and the cryptocurrency market. Trump’s administration is likely to pursue policies that foster a more favourable environment for Bitcoin, potentially benefiting its value, adoption, and long-term viability.

Advancing the Bitcoin Act and Strategic Reserve Potential

One of the most anticipated developments under the Trump administration is the prospect of passing the Bitcoin Act. This proposal would establish Bitcoin as a strategic reserve asset, with the US government acquiring up to 5% of Bitcoin’s total supply. Such a move would place Bitcoin in a role similar to gold, giving it a recognized position within the national reserve and signalling a historic level of legitimacy. If implemented, the Bitcoin Act could drive considerable institutional and governmental interest in Bitcoin, potentially accelerating its growth and pushing its value to new heights.

Shifts Toward a Crypto-Friendly Regulatory Environment

Trump’s stance on the SEC and its chairman, Gary Gensler, has been openly critical, particularly concerning the agency’s regulatory approach to digital assets. His administration is expected to bring in leadership changes that could usher in more crypto-friendly regulators at the SEC.

On the fundraising side, Coinbase, A16Z, Ripple are all 9/10/11th largest contributors to the election: less than Citadel or Susquehanna but more than Bloomberg and Blackstone, for example. Fairshake, Defend American Jobs, Protect Progress — all crypto only superPACs — are 8/13/17th largest SuperPACs by total raised. This should make it easier to push through pro-crypto legislation in Congress.

Fiscal Policy and Bitcoin as a Hedge

President-Elect Donald Trump has expressed intentions to involve Elon Musk in efforts to reduce government spending and address the national debt. During his campaign, Trump proposed appointing Musk to lead a new “Department of Government Efficiency,” tasked with cutting federal expenditures by approximately $2 trillion. Musk has indicated that such measures would involve “temporary hardship” but are necessary for “long-term prosperity.”

This collaboration underscores Trump’s focus on significant fiscal reforms, leveraging Musk’s reputation for cost-cutting and efficiency.

To balance this, a looser monetary policy trajectory is likely to be pursued, maintaining liquidity in the markets while restraining government expenditure. Historically, these conditions — easy monetary policy paired with fiscal conservatism — have been advantageous for Bitcoin, which is increasingly viewed as a hedge against currency debasement and inflation. In this environment, Bitcoin’s appeal as an alternative asset may strengthen, attracting more investors looking for a safeguard against traditional economic risks.

Declining Stigma and Rising Institutional Adoption

Trump’s administration could also help to normalise and destigmatise crypto ownership. As more influential figures and institutions warm to Bitcoin, its perception is shifting from that of a speculative asset to a mainstream investment. Despite record inflows of $29bn this year, institutional adoption remains low in the broader financial market. With favourable policies from the Trump administration, more institutional investors are likely to view Bitcoin as a viable portfolio component, accelerating its adoption and increasing demand.

A Favourable Outlook for Bitcoin’s Growth

Trump’s administration creates an environment ripe for Bitcoin’s continued rise. With the potential for legislative support through the Bitcoin Act, a crypto-friendly regulatory stance, and macroeconomic conditions that favour alternative assets, Bitcoin could see a sustained upward trajectory. The next four years may witness an unprecedented level of institutional support, increased government interest, and broader public adoption, setting the stage for Bitcoin to further solidify its place in the global financial landscape.