Last week, the price of Bitcoin soared above $100,000 and crypto enthusiasts were excited after Donald Trump announced that he would appoint crypto advocate Paul Atkins to head the Securities and Exchange Commission (SEC). celebrated this. The atmosphere in the crypto market reminded me of the dot-com boom and its inevitable collapse, which I chronicled in a book more than 20 years ago. Among some long-time market participants and observers, including myself, there is the same giddy excitement, the same predictions that prices could still go up much, much more, and the same anxiety. There were emotions.
Indeed, pro-crypto donors, who gave hundreds of millions of dollars to crypto investors, crypto entrepreneurs, and pro-crypto politicians ahead of the November election, have good reason to be excited. there were. The investment in Trump's victory and the defeat of some prominent crypto skeptics, including Democratic Sen. Sherrod Brown of Ohio, is already paying off. The SEC is the primary investor protection agency in the United States. Under the leadership of Gary Gensler, whom President Joe Biden appointed as chair in 2021, the agency has taken an aggressive approach to an industry Gensler described as rife with scams and scams. The SEC has filed lawsuits against a number of crypto companies, including cryptocurrency exchange Coinbase and digital payment network Ripple.
But under Atkins, a conservative lawyer who served as SEC commissioner in the George W. The lawsuit will likely be put on hold. And overall, the SEC is likely to take a friendlier stance toward issuers of crypto assets such as currencies and tokens, a prospect that has alarmed crypto industry critics. “When it comes to crypto assets, the fundamental rules that have protected investors for decades will be significantly weakened, allowing the industry to expand with little regulation or accountability. “That's going to happen,” said Dennis Kelleher, president of Better Markets in Washington. financial reform group based in told me. “It's going to be like the 1920s, warner.” Cryptocurrency leaders hailed Atkins' choice as groundbreaking. “We are witnessing a paradigm shift,” Michael Novogratz, founder and CEO of cryptocurrency company Galaxy Digital, told Reuters. “Bitcoin and the entire digital asset ecosystem are about to enter the financial mainstream.”
In the late 1990s, the major paradigm shift that underpinned the dot-com boom was the rise of online commerce. This has given rise to startups such as Amazon, eBay, and Pets.com that issue shares on the Nasdaq. Webbang. A 90s startup that provided promise for speculative digital assets such as Bitcoin, Dogecoin (a virtual currency promoted by Elon Musk), and virtual currency tokens issued by the Trump family's new business, World Liberty Financial. It is not possible to directly compare companies. Even if many of them turn out to be worthless, some of them will yield significant profits at some point. (Amazon is now worth about $2.4 trillion.) Webvan, an online grocery chain that promised fast home delivery, raised $375 million in a 1999 IPO and filed for bankruptcy in 2001. )
But whatever the subject of speculation, when I was writing about Internet stock bubbles, I concluded that major speculative episodes have four legs. Efficient methods you can use to communicate. Active participation of the financial industry. and a supportive policy environment.
When it comes to crypto assets, the invention of Bitcoin and blockchain (a secure, decentralized digital ledger) and the rise of social media have met the first two requirements, but Wall Street and policymakers are still unsure about the field. I was skeptical about it. These two factors were enough to ensure that investing in cryptocurrencies remained a minority interest. The most recent crypto bust from 2022 to 2023 saw the price of Bitcoin fall by more than 70% and some major crypto companies, including Sam Bankman Fried's FTX, went bankrupt. The entire stock market and the U.S. economy survived unscathed.
With the election of President Trump, all four conditions appear to be in place, laying the foundations for a broader bubble that will attract more people. Blockchain technology is still in development, and its proponents still believe it is poised to transform banking systems, revolutionize international payment systems, or have other transformative effects. claims. In Musk's X, crypto enthusiasts have a huge social platform that they can use to promote their crypto assets and call out doubters. But a key development is that policy and Wall Street are also moving in step with the crypto world.
With Atkins in charge, the SEC will likely have to decide whether crypto assets are securities like stocks or bonds, meaning they are subject to the full scope of national securities laws, or something close to that. This would change the position on the core legal issue of whether Physical goods such as gold and silver are more loosely regulated because they are considered homogeneous items that are easier to identify and value. (You know what you're getting when you buy gold bars.) During Mr. Gensler's tenure, the SEC recognized that many crypto assets are securities and that their issuers face extensive registration and disclosure requirements. He claimed that The agency accused Coinbase of operating an unregistered securities exchange, and also accused Ripple of organizing unregistered securities trading in the sale of the cryptocurrency XRP. Both companies denied the charges. Earlier this year, a federal judge ruled that most of the lawsuit against Coinbase could proceed, which was widely interpreted as a victory for the SEC, but the Ripple lawsuit is based on the company's ability to sell XRP to retail investors. Ripple hailed this as an important victory, with the ruling finding that it had not violated securities laws.
Looking to the future, international law firm WilmerHale said in a recent warning to clients that in the second Trump administration, the SEC “could propose separate rules that take into account the differences between crypto assets and traditional securities.” There is a gender,” he said. That's exactly what the crypto industry wants. Meanwhile, on Capitol Hill, Republicans are pushing to expand the reach of the Commodity Futures Trading Commission (CFTC), which has a much smaller budget and enforcement arm, allowing many crypto issuers to escape the SEC's attention, at least in part. There is a possibility that a bill will be passed that would allow this. . Earlier this year, the House of Representatives passed a Republican-backed bill that would give the CFTC the power to regulate digital assets as commodities, as long as the blockchains they rely on are decentralized. Gensler opposed the bill, saying it would weaken investor protections and allow crypto issuers to self-certify that their products are digital products rather than securities. Given that Republicans have a majority in the Senate, a similar bill could be proposed in the Senate and sent to the president's desk.
The soon-to-be crypto booster's chief executive has already promised to turn the United States into the “crypto capital of the planet.” Cryptocurrency enthusiasts will be hoping that President Trump will fulfill his campaign promise to create a “Strategic National Bitcoin Reserve.” They received further encouragement last week when Musk named fellow venture capitalist David Sachs as the “White House AI and Cryptocurrency Czar.”
In theory, the Federal Reserve could put a damper on the crypto party by limiting financial leverage, raising interest rates, or both. But such measures are unpopular when speculators are running high and asset prices are soaring. In the late 1990s, then-Fed Chairman Alan Greenspan stood by and let the Nasdaq collapse, after initially warning of “irrational exuberance.” (Between January 1998 and March 2000, the tech stock index tripled.) At this point, the possibility of the Fed intervening to push crypto assets down seems remote. The central bank is moving to lower interest rates rather than raise them, and last week Chairman Jerome Powell likened bitcoin to gold as an investment asset, something many crypto advocates have been saying.
