A Pro-Crypto Presidency to Revolutionize Regulation

With Donald Trump back in the White House, crypto markets are on the brink of a regulatory renaissance, says Bitwise CIO Matthew Hougan. As Trump’s election victory became all but certain, the flagship cryptocurrency, Bitcoin, soared to an all-time high, touching nearly $75,650. Investors and institutions are eagerly anticipating a policy landscape more favorable to digital assets. Hougan suggests that the “Golden Age of Crypto” is at hand, with regulatory shifts likely to promote transparency and cut down the infamous red tape.

For years, crypto has been in a standoff with U.S. regulators, with the Securities and Exchange Commission (SEC) frequently taking a “regulation by enforcement” stance, stifling the sector’s growth. The SEC’s combative approach, often applied through lawsuits for alleged unregistered securities distribution, has created significant operational challenges for crypto firms. Commissioner Hester Peirce herself has referred to these policies as disastrous, echoing calls from within the sector for more supportive and clear regulations.

A Change in Leadership and Tactics
Trump’s pro-crypto administration could initiate leadership changes at the SEC and put an end to restrictive measures like “Operation Choke Point 2.0,” which sought to limit financial services to certain sectors, including crypto. Hougan notes that Trump’s campaign was marked by favorable comments about crypto, fueling speculation that the SEC’s approach may soon transform. With friendlier policies, Hougan expects a surge in institutional interest, creating the space for innovations previously held back by regulatory roadblocks.

Price Growth and the Institutional Surge

As Bitcoin reached new highs, Hougan pointed out that the asset’s strong fundamentals already support further growth. Institutional demand has strengthened, with over $23 billion pouring into Bitcoin ETFs this year, and interest from blue-chip institutions is at an all-time high. Factors such as the Bitcoin halving event in April 2024, coupled with robust real-world applications (e.g., stablecoins and prediction markets like Polymarket), give Bitcoin a durable appeal.

On the macroeconomic front, a surge in U.S. debt and potential cuts in interest rates create fertile ground for Bitcoin’s growing role as a store of value. Hougan notes that, in this environment, Bitcoin is increasingly seen as a “must-have” asset for portfolios seeking stability amid economic fluctuations.

Selectivity: A Critical Factor for Investors

Despite the optimism, Hougan warns that a favorable regulatory environment should not lead investors to throw caution to the wind. Even with a pro-crypto administration, not all projects are likely to thrive; many will struggle in an industry where competition and the need for innovation are high. This regulatory reset offers a clear path for quality projects to stand out, but it also means weaker ones may be swiftly weeded out.

Hougan encourages investors to be disciplined, applying scrutiny to their selections and focusing on projects with clear, scalable use cases. The industry’s evolving maturity and a more accommodating regulatory environment will allow projects to compete on their own merits, creating a more level playing field for all.