After intense post-election rallies that saw Bitcoin (BTC -1.64%) Investors were quick to appreciate the pro-crypto optimism surrounding Donald Trump's inauguration as president, as it soared nearly 40%. Bitcoin has since retreated from the $100,000 level, but all the lights seem to be flashing green for cryptocurrencies heading into 2025.
So what can we expect over the next four years? Will President Donald Trump's inauguration lift the entire crypto market, or will it primarily boost Bitcoin's fortunes?
Business-friendly regulatory environment
It is almost a foregone conclusion that President Trump’s inauguration will create a new pro-business regulatory environment for cryptocurrencies. Already, SEC Commissioner Gary Gensler, who is widely seen as an anti-cryptocurrency naysayer, has agreed to resign on January 20th.
By the end of 2025, sweeping new legislation could be passed to finally modernize the U.S. financial system and embrace cryptocurrencies. The House of Representatives has already approved the Financial Innovation and Technology for the 21st Century Act, so all we need is the political will to pass a version of this bill.
Image source: Getty Images.
The new law could create the Commodity Futures Trading Commission, rather than the SEC, as the lead regulator for cryptocurrencies. Therefore, over the next four years, the SEC's ability to exercise its authority over cryptocurrencies may decline.
The biggest beneficiaries are likely to be cryptocurrencies that have experienced run-ins with the SEC over the past 24 months. For example, in 2023, the SEC created a list of about 50 cryptocurrencies that may actually be securities, making them subject to more rules. The list included several big names including Cardano (ADA 10.93%) and solana (Sol -5.74%). That could be good news for their future prospects if the regulatory cloud hanging over them lifts. Robinhood Markets the week after the election (NASDAQ:Food) Both were relisted for trading.
Cryptocurrency as a national strategic priority
One of the most exciting developments likely to occur during the four years of the Trump presidency is the creation of a strategic Bitcoin reserve. As currently conceived, it would function similarly to the nation's Strategic Petroleum Reserve, a large reserve that could be used to tide over difficult periods of economic instability. And in a best-case scenario, it could even be used to pay down the country's $35 trillion debt burden.
If you think this is a picture-perfect mochi, think again. U.S. Sen. Cynthia Lummis (R-Wyo.) has already introduced the Bitcoin Act of 2024, which would create a Strategic Bitcoin Reserve. This commits the US government to purchasing 1 million Bitcoins over the next five years. This corresponds to 5% of the total circulating supply. The United States would then become a crypto superpower, as President Trump signaled as a goal during his campaign.
What's interesting is that other countries may do the same. For example, on November 25, Brazil introduced a plan to create a Bitcoin Strategic Reserve equal to 5% of the country's international reserves. This Bitcoin reserve could be used for a variety of purposes, including stabilizing a country's currency, supporting international trade, and supporting the launch of new central bank digital currencies.
New financial products for investors
Additionally, look for new products for investors. In many ways, the creation of the Spot Bitcoin ETF can be seen as just the first step in Wall Street rolling out a new product for investors. The exchange-traded fund genie is now out of the bottle, so look for many more ETF products for investors, including exotic cryptocurrencies with market caps much smaller than Bitcoin.
Additionally, there are crypto-related financial products that investors can access in other countries, which could find their way into the United States under the Trump administration. One of the most popular is known as a perpetual futures contract. coinbase global (NASDAQ:Coin) Due to leverage and volatility concerns, this contract cannot be offered in the United States, but it can be offered to international investors. That's exactly the type of product that could end up making its way to U.S. investors under the Trump administration.
Will Bitcoin remain the top cryptocurrency?
Generally speaking, all of these developments will be positive for the broader crypto market, but there is no guarantee that nothing will happen. But the clear winner is likely to be Bitcoin. It is one of the cryptocurrencies that President-elect Trump is primarily focused on, and one of the most trusted by institutional investors and Wall Street. If a strategic Bitcoin reserve were created, Bitcoin would come to the forefront as a symbol of American economic power.
Remember, Bitcoin tends to be very cyclical, with a halving event occurring once every four years. Therefore, we are likely to see at least one major market crash over the next four years. The wild speculative frenzy in the crypto market could end badly if all regulatory shackles are removed from crypto market participants.
The good news is that Bitcoin has proven to be very resilient in its 15-year history. Every time the market crashes, new all-time highs have been set. In other words, we could be talking about Bitcoin hitting new stratospheric highs by the end of President Trump's second term.
Dominique Basurto has positions in Bitcoin, Cardano, and Solana. The Motley Fool has positions in and recommends Bitcoin, Cardano, Coinbase Global, and Solana. The Motley Fool has a disclosure policy.
