Bitcoin as a Catalyst for a New Cold War

In this article, we will analyze why Trump’s victory might be the most significant event in cryptocurrency history.

Two weeks after surviving an assassination attempt, Trump addressed a Bitcoin conference, declaring the U.S. would become the world’s cryptocurrency and Bitcoin capital. He announced that the U.S. government would never sell a single Bitcoin, that pro-crypto regulations would be implemented, and most notably, that the U.S. would establish strategic Bitcoin reserves, modeled after existing gold and oil reserves.

Pro-crypto politics significantly contributed to Trump’s victory, especially given that the crypto community is younger, tech-savvy, urban, and, by definition, has historically leaned toward Democrats. Key figures in his administration, including Elon Musk, Vivek Ramaswamy, J.D. Vance, Scott Besant (Treasury Secretary), Paul Atkins (SEC Chair), and RFK Jr., are pro-business and pro-crypto. 

With such monumental promises and even greater expectations, all the ingredients for a significant bull run in the cryptocurrency market seemed to be present. But when something appears too certain, is it always the case?

However, history teaches us that when market expectations are high, the actual outcome may not always meet those expectations. Many investors have already taken long positions, effectively betting on the anticipated outcome.

While short-term considerations like historical price movements and the time elapsed since the last Bitcoin halving are relevant, this analysis will explore a different perspective: that Trump’s victory ushered in a new era where existing market paradigms no longer fully apply.

1. Bitcoin ETFs

The approval of Bitcoin ETFs in January 2024 allowed Wall Street and institutional investors to enter the Bitcoin market, previously inaccessible. Bitcoin ETFs have become the fastest-growing ETFs in history. BlackRock’s Bitcoin ETF amassed more assets in less than a year than its Gold ETF did in two decades. Ethereum ETFs followed suit, and discussions regarding Solana and XRP ETFs gained traction.

2. Bitcoin in Corporate Treasury Strategies

An increasing number of companies are incorporating Bitcoin into their treasury strategies to preserve capital. These strategies aim to: Outpace inflation, measured by the Consumer Price Index (CPI). Outperform the S&P 500, which historically averages a 10% annual return. Bitcoin’s average annual growth of 100% over the past decade has made it a standout asset for capital preservation. No other asset has exhibited such rapid growth over this period.

3. Strategic Bitcoin Reserves

A key factor hinges on creating strategic Bitcoin reserves. Even after his election, Trump reiterated his commitment to this initiative. These reserves would serve two primary purposes for the U.S. government: To profit from Bitcoin’s value appreciation, driven by its capped supply and the increasing money supply. 

Historically, the value of Bitcoin tends to rise with the decline in the value of the dollar. For the maintenance of U.S. global dominance into a future where the digital economy is dominated by cryptocurrencies and CBDCs, drawing a parallel to the Bretton Woods Agreement of 1944, wherein the U.S. amassed huge stores of gold reserves before establishing the dollar as a global reserve currency, Bitcoin reserves could be the way toward a new global financial order.

If the U.S. creates Bitcoin reserves, other countries will also have to follow suit in order not to be left behind in the new digital economy. Much as countries keep gold reserves today, the reason would be as a hedge. 

4. Crypto Regulation

Then there’s the promise that the U.S. government is going to roll out friendly crypto regulation, particularly about stablecoins. While the broad EU Markets in Crypto Assets Directive has been an excessive drag, it prevents promising crypto projects. This leaves the door ajar for the U.S. to become the crypto capital of the world.

Conclusion

Trump’s victory likely catalyzed the largest bull run in cryptocurrency history. This marks a whole new era for the industry. Cryptocurrencies have become part of national strategic reserves, corporate treasury strategies, and a globally accepted asset class.

But the greater danger lies in Trump’s potential inability to deliver. He might deliver in a manner that the market did not expect. Even with anticipated delays or broken promises, the longer-term direction for cryptocurrencies seems firm. This trajectory appears independent of American leadership. Other countries, such as BRICS nations, might take leading roles in the evolving financial system.