How Donald Trump shook the crypto market heading into the 2024 US presidential election

Regardless of the outcome of this week’s U.S. presidential election, former President Donald Trump’s pivot from crypto skeptic to crypto cheerleader has left a big mark on the cryptocurrency industry.

His embrace of the community has helped push the price of bitcoin toward a new all-time high and brought in hundreds of millions of dollars across prediction markets and memecoins.

In the battle between Republican candidate Donald Trump and Vice President Kamala Harris, the decentralized prediction platform Polymarket has generated a total betting volume of  over $3 billion on the winner alone.

"Trump’s presidency has historically driven stronger bullish sentiment than Harris is likely to,” said Georgi Koreli, founder and CEO of Hinkal. “U.S. blockchain and crypto projects face regulatory scrutiny, deterring some from the market. With Harris as a Democrat, investors may be initially cautious, but both candidates’ likely policies on money supply expansion are expected to favor crypto adoption."

Trump’s crypto pivot

Trump's stance on cryptocurrency changed in May when his campaign started accepting crypto as a form of donation. This marked the first time a major U.S. presidential nominee embraced cryptocurrency for donations.

In June, Trump met with executives from various bitcoin mining companies,  suggesting that  bitcoin mining might be the “last line of defense against” a central bank digital currency.

Trump then chose Sen. JD Vance (R-Ohio) as his running mate in July. The Republican was seen as favorable to the crypto industry and has been critical of the U.S. Securities and Exchange Commission. Vance has an estimated net worth of $5 million and disclosed he owns between $100,001 and $250,000 in bitcoin as of 2022.

In August, Trump announced that Cantor Fitzgerald Howard Lutnick would help lead his transition team if he became president again. The latter has been described as a “big crypto bull,” and Cantor Fitzgerald has been a custodian for Tether since late 2021.

During a campaign stop, Trump visited PubKey Bar in New York City and made what’s believed to be the first bitcoin purchase ever by a U.S. president, has promoted Bitcoin-themed sneakers and even  wished a happy 16th birthday to Bitcoin.

Trump’s most impactful moment with the industry occurred on July 27, when he gave a keynote speech at Bitcoin 2024 in Nashville—one of the premier conferences of the year. There, he promised to end “Operation Chokepoint 2.0” and other anti-crypto policies, and he also drew huge cheers for promising to replace Gensler if he’s elected.

"It will be the policy of my administration...to keep 100% of all the bitcoin the US government currently holds or acquires into the future," Trump said in his address. "This will serve in effect as the core of the strategic national bitcoin stockpile...It's been taken away from you." 

Trump's impact on bitcoin, crypto markets

The Republican candidate’s embrace has given way to the so-called “Trump trade” narrative, which essentially says that a Trump win will lead to a rise in the price of bitcoin and other cryptocurrencies.

"The ‘Trump trade’ narrative and favorable Q4 seasonality create a perfect storm for bitcoin, promising an exciting period ahead despite potential price volatility leading into the election," Bitfinex analysts recently told The Block.

CoinShares said global crypto funds run by asset managers like BlackRock and Fidelity, among others, registered net inflows of $2.18 billion last week, bringing year-to-date figures to a record $29.2 billion.

“We believe euphoria around the prospect of a Republican victory was the likely reason for these inflows as they were in the first few days of last week,” CoinShares Head of Research James Butterfill said in a report one day before the election.

Analysts at Bernstein expect bitcoin could break all-time highs and reach $80,000 to $90,000 should Trump win in the run-up to inauguration day on Jan. 20, 2025. Meanwhile, JPMorgan analysts say a Trump win could drive more retail demand for bitcoin.

“No matter who wins the presidency, expect U.S. debt ratings downgrades and a greater focus from treasury buyers on the sustainability of fiscal plans,” VanEck Head of Digital Assets Research Matthew Sigel told The Block last month. “We think bitcoin is a winner under those circumstances. How the rest of the market (altcoins) act will depend more on who wins, with Trump the ETH holder clearly better for proof-of-stake coins if current policies continue.”

MAGA, Musk and memecoins

There has been no shortage of memecoins looking to cash in on Trump’s popularity, though some have shown more staying power than others. It should be noted these tokens have no official affiliation with Trump.

MAGA (ticker: TRUMP) launched in September 2023 and has amassed a market cap of $166 million at the time of writing. The token hit an all-time high above $17 in June and currently trades around $3.66. Among other notable memecoins are Doland Tremp (TREMP), with a $31 million market cap and MAGA Hat (MAGA), with an $80 million market cap.

The overall PolitiFi market cap is $691 million, according to CoinGecko. Political Finance (PolitiFi) are memecoins inspired by political figures.

The original memecoin, Dogecoin, has also benefited from Trump’s run. Tesla and SpaceX CEO Elon Musk has spent tens of millions of dollars to help reelect Trump and has frequently talked about creating a “Department of Government Efficiency,” or D.O.G.E, to cut back on wasteful spending and complicated regulations.

“Having highly credible and influential people who understand the value of crypto from a freedom/decentralization perspective is a net good for the space, full stop,” Bitwise CIO Matt Hougan told The Block . “I don't think you can short-term ‘trade' his remarks, but I think you can own the trend.”

Trump promotes World Liberty Financial

Trump’s most direct foray into the crypto world came from the DeFi project World Liberty Financial . Trump is listed as WLF’s "chief crypto advocate," and his three sons—Donald Jr., Eric and Barron—are its Web3 ambassadors.

Despite two months of hype surrounding the project, World Liberty Financial’s public token sale generated just $10 million on its first day. At the time of writing, about 981 million WLFI tokens had been sold for $0.015 apiece, a fraction of the 20 billion tokens available to the public.

"[I]n DeFi, utility matters," Bitwise’s Hougan told The Block. "WLF struck me as a meme masquerading as a utility project. I think people recognized that and so it didn't take. DeFi also can't be personality-focused. That's where the 'De' comes from. And so, a personality-focused DeFi project is just a little oil and water."

What’s next?

Kamala Harris has not come anywhere close to her competitor in trying to court the crypto industry, but some experts say that may not matter too much.

"Of course, in the short term, crypto favors a Trump victory over a Harris victory, but really, Bitcoin doesn't need Washington to succeed," Hougan recently said . "Institutions are moving into the space, adoption is rising, ETF flows are happening. I think we go higher either way."

Analysis from VanEck’s Matthew Sigel and Nathan Frankovitz suggests that the election outcome could be mixed: "[T]he trend of growing fiscal deficits and rising national debt will likely continue. This suggests a weakening of the U.S. dollar, a macroeconomic environment in which Bitcoin has historically thrived."

According to Alison Mangiero, executive director at the advocacy group Proof of Stake Alliance, people who identify as pro-crypto will fill Congress beyond the presidency.

"Regardless of how each race shakes out, we are going to have the most pro-crypto Congress we've ever had," Mangiero told The Block . "There will still be a lot of work to do in terms of education and in terms of the industry because we've poured so much money into these races that now the real work is going to begin."