2024 US Election and the Turning Point for the Encryption Industry

Bitcoin and encryption have become important topics in the 2024 U.S. elections. This article analyzes the multiple factors contributing to the growing significance of encryption in the elections, explores the encryption policy positions of presidential candidates, and discusses the potential impact of the election results on the encryption industry.

The Background of Cryptocurrency as an Important Election Issue

The significance of Bitcoin to the United States

Strengthened demand for hedging against inflation

Real wage levels in the United States have barely improved since the mid-1980s, and the wealth gap continues to widen. Bitcoin is seen as a potential tool to combat inflation and economic uncertainty, offering hope for economic independence to the middle class.

In the next 10 years, the U.S. federal budget deficit is expected to average 6.2% of GDP. If Trump continues the tax cut policy, the deficit could rise to 7.8%; Harris's reform proposal could also push the deficit to 6.5%.

In the past 25 years, the U.S. federal debt-to-GDP ratio has risen from 40% to 100%, and it may further climb to 124%-200% in the future. The upcoming election could trigger a "Minsky Moment", leading to a bond market collapse and triggering a financial crisis.

Strengthen the international influence of the US dollar

Stablecoins have become the focus of policy discussions and help to continue strengthening their international influence in the context of the weakening global status of the US dollar. Currently, over 99% of stablecoins are denominated in US dollars, far exceeding other currencies.

Stablecoins have also become significant holders of U.S. Treasury bonds, providing additional liquidity support to the economy.

Voter interest in encryption is rising

Surveys show that about half of potential voters in the U.S. tend to support candidates with a positive attitude towards encryption. The attention of key swing state voters towards encryption has also significantly increased.

The Biden administration's regulatory hunt on encryption companies.

The Biden administration has strengthened regulation of encryption, taking legal action against several large encryption companies, such as filing securities charges against Ripple and suing Coinbase.

encryption plays a key role in corporate donations.

In 2024, encryption companies have become a major force in political donations in the United States. Coinbase and Ripple are the largest corporate political donors. Fairshake Super Political Action Committee has raised over $200 million to support encryption candidates.

The Impact of the Election

The policy propositions of both candidates

Harris

Harris has limited statements on encryption policy, only saying that she will "encourage innovative technologies while protecting consumers and investors." Currently, the Biden/Harris administration takes an adversarial stance towards the encryption industry, but Harris's policies may be more friendly than Biden's.

Trump

Trump has shown a strong interest in the digital assets industry, promising to make the U.S. the "global capital of cryptocurrency and Bitcoin." He supports Bitcoin mining, pledges to protect self-custody rights, and criticizes the SEC's tough stance on encryption.

Trump proposed a series of encryption policy recommendations, including:

• Establish Bitcoin government reserves
• Establish a cryptocurrency advisory committee
• Prevent the Federal Reserve from launching digital currency

The situation of "divided government" may arise.

It seems that a "divided government" scenario is very likely to occur, where the presidency and the Senate are controlled by different parties. This could lead to a policy deadlock. If the Republican Party wins decisively, it is expected to quickly pass new legislation that would be favorable for the encryption market.

The SEC leadership is likely to change.

Whether Harris or Trump wins, there may be significant changes in the leadership of the SEC, which could lead to adjustments in the regulatory attitude towards the encryption industry.

Macro liquidity: fluctuations are inevitable, and the degree of QE is the determining factor.

When the Federal Reserve lowers interest rates and global liquidity increases significantly, it is often also a time when Bitcoin prices rise. Trump has promised that if he is elected again, he will significantly reduce interest rates, which may drive up encryption assets.

How the election affects encryption startups

Web3 prediction markets achieve absolute superiority over Web2 competitors

Polymarket has become the leader in betting for the U.S. presidential election, capturing 80% of the market share. Prediction markets are becoming a broader financial tool, with influence extending into multiple domains.

Predicting the future development direction of the market

Multiple exchanges have launched leveraged trading related to the US elections, introducing advanced order features to help users manage risks.

Trump's victory means boosting encryption companies to incubate and list in the US.

The Trump administration may provide a clearer and more relaxed regulatory environment, which would benefit encryption companies in developing and listing in the U.S. This will attract more traditional funds into the encryption field.

DeFi and BTCFi will be the first to benefit.

Trump has shown interest in the DeFi sector. BTCFi is expected to gain a more relaxed regulatory environment, with a total scale anticipated to be more than ten times the current market value of BTC. Upgrades to Bitcoin such as the passing of OP_CAT will drive a series of innovative applications based on Bitcoin's programmability.