Analysis of the Impact of the 2024 U.S. Election on the Encryption Industry

As Bitcoin undergoes three election cycles, encryption has become a key issue in the 2024 U.S. elections. This article analyzes the multiple factors contributing to the increasing importance of encryption in elections, including the erosion of real wages due to inflation, challenges to the global status of the dollar, the growing interest of voters in encryption, and the regulatory strategies of the current government.

The Background of Cryptocurrency Becoming an Important Election Topic

The significance of Bitcoin to the United States

The demand for hedging against inflation is increasing.

Since the financial crisis of 2008, Bitcoin has been seen as a potential tool to combat inflation and economic uncertainty, particularly offering hope for the middle class to achieve economic independence. The decentralization and limited supply of Bitcoin make it an alternative asset under government and central bank intervention.

According to forecasts, the average federal budget deficit in the United States will account for 6.2% of GDP over the next 10 years. If Trump continues the tax cut policy, the deficit could rise to 7.8% of GDP. In contrast, Harris's reform proposal may bring the deficit to 6.5% of GDP.

Over the past 25 years, the ratio of U.S. federal debt to GDP has risen sharply from 40% to 100%, and it may climb to 124%-200% in the future. The upcoming presidential election could trigger what is known as a "Minsky moment," where the bond market realizes the severity of the debt problem and subsequently demands higher returns to compensate for financing risks.

It is worth noting that the Bitcoin bill currently awaiting congressional approval could provide a new solution to the U.S. debt issue. The bill aims to integrate Bitcoin into a broader financial system and has the potential to help stabilize the U.S. debt structure by attracting significant private and institutional capital.

Strengthen the international influence of the US dollar

Stablecoins have become a focal point of policy discussions, with the U.S. Congress reviewing several related bills. One of the key factors driving this discussion is the recognition that stablecoins help to continue strengthening the international influence of the dollar as its status as a global reserve currency gradually weakens. Currently, over 99% of stablecoins are denominated in dollars.

In addition to enhancing the influence of the US dollar internationally, stablecoins may further strengthen the financial foundation of the United States domestically. Although stablecoins have only developed over the past decade, they have already become one of the top 20 holders of US Treasury securities, surpassing countries like Germany.

The rise of voters' interest in encryption

Surveys show that about half of potential American voters are more inclined to support candidates who have a positive attitude towards encryption. In key swing states, interest in encryption searches has also risen significantly.

The Biden administration's regulatory hunt on encryption companies

The Biden administration began to strengthen encryption currency regulations early in its tenure, with measures including filing securities charges against Ripple, increasing tax reporting requirements, and imposing capital gains taxes. After the collapse of FTX, the government intensified accountability for large encryption currency companies.

encryption plays a key role in corporate donations

In 2024, cryptocurrency companies have become one of the major forces in political donations in the United States. Coinbase and Ripple are now the largest corporate political donors this year, accounting for nearly 48% of total corporate donations. The Fairshake Super Political Action Committee has raised over $200 million to support candidates who advocate for encryption.

The Impact of the Election

The policy claims of both candidates

Harris

Harris's statements on cryptocurrency policy are relatively limited, only indicating that they will "encourage innovative technologies such as artificial intelligence and digital assets while protecting consumers and investors." The current Biden/Harris administration's regulatory stance on the cryptocurrency industry is quite adversarial, having taken actions including filing multiple lawsuits, restricting traditional banking services, and vetoing bipartisan legislation.

Trump

Trump stated that he wants to make the United States the "capital of global encryption and Bitcoin," supports Bitcoin mining, and promises to protect the rights of self-custody. He also proposed a series of encryption policy recommendations, including establishing a Bitcoin government reserve, creating an encryption advisory committee, and preventing the Federal Reserve from launching a digital currency.

"The situation of a "divided government" may arise.

Currently, it seems that unless one party can simultaneously secure both the House of Representatives and the presidency, periods of instability are nearly inevitable in other circumstances. This political situation often leads to policy gridlock, as the president and the Senate must compromise on significant legislation and personnel nominations.

The SEC leadership is likely to change.

Regardless of whether Harris or Trump wins, there may be significant changes in the leadership of the SEC. Trump has publicly stated that if he is elected again, he will "fire" the current SEC chairman Gary Gensler.

Macroeconomic liquidity: fluctuations are unavoidable, the degree of QE is the determining factor.

When the Federal Reserve cuts interest rates and global capital liquidity increases significantly, it is often also a period when Bitcoin prices continue to rise. Trump promised that if he is elected again, he will significantly lower interest rates in the United States, which may once again drive up Bitcoin and other encryption assets.

How Elections Affect Encryption Startups

Web3 prediction markets achieve absolute superiority over Web2 competitors

Since its launch in 2020, Polymarket has rapidly risen to become a leader in this field, capturing 80% of the total betting volume for the U.S. presidential election. Prediction markets are gradually becoming a more widespread financial tool, surpassing mere speculative activities.

Predicting the future direction of the market

Currently, Backpack Exchange has launched prediction tokens for the US election, SynFutures and dYdX have introduced leveraged trading related to the US election, and advanced order features have been implemented to help users manage risks.

Trump's victory means encouraging encryption companies to incubate and go public in the United States.

Under the leadership of the Trump administration, a clearer regulatory framework and a more lenient regulatory environment will emerge, significantly altering the current situation where many encryption companies are fleeing the United States and blocking U.S. IPs. Several cryptocurrency-related companies may go public in the next year or two, and other eligible encryption companies are also expected to move towards the normal listing process.

DeFi and BTCFi will be the first to benefit.

BTCFi is easier to build consensus and gain legitimacy, with a more solid foundation, and its development is certain. The encryption enterprises developing BTC financial tools can be encouraged and receive a more relaxed regulatory environment. The innovation of BTCFi will be led by developers, driving a series of groundbreaking applications based on Bitcoin's programmability.