After a blistering post-election rally that saw Bitcoin (CRYPTO: BTC) soar by nearly 40%, investors were quick to credit the pro-crypto optimism surrounding a Donald Trump presidency. While Bitcoin has since pulled back from the $100,000 mark, all lights seem to be flashing green for crypto as we head into 2025.
So what can we expect during the next four years? Will a Donald Trump presidency lift the entire crypto market, or will it primarily boost the fortunes of Bitcoin?
A pro-business regulatory environment
It's almost a forgone conclusion that a Trump presidency will result in a new pro-business regulatory environment for crypto. Already, SEC head Gary Gensler, who is widely perceived to be anti-crypto, has agreed to step down on Jan. 20.
By the end of 2025, we could see the passage of sweeping new legislation that finally modernizes the U.S. financial system to embrace crypto. The House of Representatives has already approved the Financial Innovation and Technology for the 21st Century Act, so all that's needed is some political willpower to get a version of this legislation signed into law.
Image source: Getty Images.
New legislation could result in the establishment of the Commodity Futures Trading Commission -- and not the SEC -- as the lead regulator for crypto. So over the next four years, we are likely to see erosion in the SEC's ability to exercise authority over crypto.
The biggest beneficiaries are likely to be any 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 it thought might actually be securities, which would subject them to more rules. There were some big names on the list, including Cardano (CRYPTO: ADA) and Solana (CRYPTO: SOL). If the regulatory cloud hanging over them lifts, that could be good news for their future prospects. In the week after the election, Robinhood Markets (NASDAQ: HOOD) relisted both of them for trading.
Crypto as a national strategic priority
One of the most exciting developments that might occur over the four years of a Trump presidency is the establishment of a strategic Bitcoin reserve. As currently conceived, it would function much like the nation's strategic petroleum reserve: a massive stockpile that could be used during times of economic instability to help smooth over rough patches. And, in a best-case scenario, it might even be used to help pay down the nation's $35 trillion debt load.
If you think this is just pie-in-the-sky thinking, think again. U.S. Sen. Cynthia Lummis, R-Wyoming, has already introduced the Bitcoin Act of 2024 that would make the strategic Bitcoin reserve a reality. It would commit the U.S. government to purchasing 1 million Bitcoins over the next five years. That's equal to 5% of the total circulating supply. Doing so would make the U.S. a crypto superpower, as Trump suggested was his goal during the campaign.
What's interesting is that other nations could do the same. For example, on Nov. 25, Brazil introduced plans to create a sovereign strategic Bitcoin reserve that would be equivalent in value to 5% of the nation's international reserves. This Bitcoin reserve could then be used for a variety of purposes, such as stabilizing the national currency, supporting international trade, or helping to launch a new central bank digital currency.
New financial products for investors
In addition, look for new products for investors. In many ways, you can think of the creation of the spot Bitcoin ETFs as just the first step in Wall Street's rollout of new products for investors. The exchange-traded fund genie is now out of the bottle, so look for plenty more ETF products for investors, including those for exotic cryptocurrencies with much smaller market caps than Bitcoin.
Moreover, there are crypto-related financial products that investors have access to in other nations, that might make their way to the U.S. under Trump. One of the most popular is known as a perpetual futures contract. Coinbase Global (NASDAQ: COIN) can't offer this contract in the U.S., due to concerns about leverage and volatility, but it can offer it to international investors. That's exactly the type of product that could eventually find its way to U.S. investors during a Trump administration.
Will Bitcoin remain the top crypto?
Generally speaking, all of these developments would be positive for the broader crypto market, though none are guaranteed to happen. But the clear winner is likely to be Bitcoin. This is the one cryptocurrency that has the primary attention of President-elect Trump, and the one cryptocurrency that is most trusted by institutional investors and Wall Street. If a strategic Bitcoin reserve is ever created, then Bitcoin would be front and center as a sign of America's economic power.
Just keep in mind: Bitcoin tends to be very cyclical, due to halving events that take place once every four years. So there's likely to be at least one big market crash over the next four years. If all the regulatory shackles are taken off crypto market participants, a wild, speculative frenzy in the crypto market might end badly.
The good news is that Bitcoin has proved to be extremely resilient over its 15-year history. Every market crash has been followed by new all-time highs. So we could be talking about Bitcoin hitting stratospheric new highs by the end of the second Trump presidency.
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Dominic Basulto 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
