Finance
Here’s how a Democratic victory could impact the cryptocurrency market
Heading into the latter part of the 2024 presidential campaign, the Republican Party appears to have the upper hand among pro-crypto voters. Former President Donald Trump has a pro-Bitcoin (CRYPTO: BTC) agenda, even going so far as to proclaim that he wants America to become the “crypto capital of the planet.”
In contrast, the Democrats don’t seem to have much to offer. In fact, there is no mention of “crypto” or “digital assets” anywhere in the Democratic Party’s 91-page platform. The Biden-Harris administration is largely seen as anti-crypto, and some of the names floated as potential economic advisers in the Harris-Walz administration are also seen as skeptical of the cryptocurrency movement. With that in mind, here’s how a Democratic victory could impact the cryptocurrency market.
Bitcoin
A Democratic victory could set a limit on how much higher Bitcoin could go during the current market cycle. Right now, the current consensus is that Bitcoin has the potential to double in price to somewhere between $100,000 and $150,000 by the end of 2025. But that robust prediction, based in part on the assumption that Trump will beat Biden, could change now that a Democratic victory looks much more likely with Kamala Harris as the party’s nominee.
It’s not so much that the Harris administration is going to crack down on crypto, or that it’s going to adopt an anti-Bitcoin policy. It’s that they don’t plan to do anything new. Unless some new development forces the Harris administration’s hand, this means no new comprehensive regulatory framework for crypto, no new tax policy to encourage cryptocurrency investment, and no new tax policy to incentivize Bitcoin mining.
This last point deserves particular attention, as the Biden-Harris administration generally tends to view Bitcoin mining as energy inefficient and a drag on the country’s power grid. For example, in September 2022, the White House released a comprehensive report on digital assets that found Bitcoin mining largely at odds with green economic policies.
Altcoins
Altcoins (typically defined as any cryptocurrency that is not Bitcoin) could also suffer. This is due to the impact that an uncertain regulatory environment has on investors’ risk appetite. In other words, investors are much less likely to invest in speculative currencies if there is a risk that the government could classify these currencies as securities.
Given the lack of a comprehensive regulatory framework for cryptocurrencies, the SEC has largely taken the lead in regulating cryptocurrencies. And that has led to some baffling decisions, including a crackdown on activities like crypto staking, and a lot of mixed messages about which coins might actually be securities. At one point the SEC even suggested as much Ethereum (CRYPTO:ETH) can be a security!
The good news here is that the Democratic party is finally seeing the light. Just days before the Democratic National Convention kicked off in Chicago, a group of influential crypto investors calling themselves “Crypto4Harris” hosted a virtual town hall with several top Washington lawmakers, including Senator Charles Schumer (D-NY).
A key takeaway from the event was that the Financial Innovation and Technology for the 21st Century Act (FIT21) could be passed very soon. That would be huge, because this pro-crypto legislation specifically calls for digital assets to be regulated as commodities, not securities. That would mean little or no role for the SEC in the future, and an increased role for the Commodity Futures Trading Commission (CFTC).
Crypto stocks
Finally, it is important to consider the potential impact of a Democratic victory on crypto stocks. Primarily, this includes Bitcoin mining stocks. For now, things don’t look good for these companies. Marathon digital holdings (NASDAQ: MARA)for example, has even privately suggested that it will move more of its mining operations abroad if the next presidential administration does not take a more pro-Bitcoin approach.
And don’t forget it Coinbase worldwide (NASDAQ: MINT)the world’s second largest cryptocurrency exchange. Any deterioration in sentiment in the crypto market has a direct impact on trading volume and investors’ willingness to invest their money in risky assets. The SEC has repeatedly taken action against Coinbase and popular coins traded on its platform, so a Democratic victory could be a green light for more of the same troubling activity.
How to invest in crypto in 2025
Let’s assume the Democrats win the November 2024 election. What then? Of course, you shouldn’t panic and dump your Bitcoin. But you have to be a lot smarter about building a crypto portfolio. For example, you might want to look for green Bitcoin mining stocks like Clean spark (NASDAQ: CLSK) that use clean energy sources to mine Bitcoin. That idea might have more appeal under an environmentally conscious board.
That said, you should definitely keep your expectations in check when it comes to crypto in 2025. Without a major pro-crypto push from the new presidential administration, I wouldn’t hold my breath waiting for Bitcoin or other cryptos to skyrocket. value.
Should you invest $1,000 in Bitcoin now?
Consider the following before buying shares of Bitcoin:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns August 22, 2024
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has one disclosure policy.
Here’s how a Democratic victory could impact the cryptocurrency market was originally published by The Motley Fool
