In my last blog I did a light political touch and, with elections upon us, we’ll have a new president soon. I was at a conference recently and someone asked me what I would like to see in DC with regards to advancing the industry. Well, not surprisingly, I have a few thoughts which I will explore in detail below. Before I do that, however, let’s take a look at why we think all roads right now point North, and that some time after the election we expect things to really take off.
North!
So, we’ve talked quite a bit about the bull market in front of us, including the four year cycle, the Bitcoin Halving events and specifically last blog discussing the impact of global M2. We see one more set of data which is worth review, specifically, what we’ve seen in past cycles particularly around interest rate cuts.
The first milestone we generally see is Bitcoin putting in a new all-time high. That’s when traders start pulling off their short positions and FOMO starts to set in. It’s interesting, because everyone knows buying low and selling high is how one maximizes gains, yet time and time again it’s only when markets really move, and when we get a new high when we see real price movement to the upside. Then, it’s roughly 6 months after cutting of interest rates before crypto really starts to go parabolic. (see chart below
Assuming we break a new ATH in November, we should see this new bull run back on after a dull summer. The election may have a short-term swing either way, but our base case is that if there is a downdraft due to a Harris win it will be short lived. Markets hate uncertainty, so once we’re clear on who the new POTUS is, we’ll see crypto markets with the ‘all clear’ sign. The edge case, which would be the worst of all worlds, is if we had a contested election that took weeks to resolve, and that would leave us with some market limbo. In any case, even a Trump victory may not mean we see a “god candle” going straight up – we may see a quick bump with markets that are a little more moderate as we get closer to December. Regardless, the punchline to all of this is that we expect December and all of Q1 to have the chance for higher prices in crypto.
Back to global M2, the Fed’s cutting of interest rates is just the beginning to the Global Liquidity cycle. We’re seeing central banks around the world cutting rates in a coordinated effort. It looks like we’ll have a 0.25% rate cut on November 7, and we wouldn’t be surprised with one more rate cut in December, with cuts continuing throughout 2025. This, combined with either direct or indirect QE, which is required to keep markets functioning, will mark Phase III of this crypto bull market where prices get pushed to new all-time highs.
Ponders for the President
Regardless of who our next president is the missives are the same. It’s really not that complicated. By embracing, instead of pushing this industry away, we all get to grow. If I had the ability to advise the next president, this is what I’d say:
- Make it safe for the banks to participate. We finally had a bi-partisan bill passing congress in 2024 that would have repealed SAB 121, an SEC accounting bulletin that basically stifled the ability of banks to custody crypto. Unfortunately it was vetoed by Biden – a big mistake. We need to encourage banks to be custodians and not box them out. This supports everyone, from the industry to the participants to the banks.
- Encourage innovation instead of punishing it. In 2024 the SEC has so far sent 7 wells notices as it continues its regulation by enforcement agenda. This is crazy, especially when sent to enterprises like OpenSea, which is a marketplace for exchanging NFTs. There is no way that a collectible digital item is a security any more than a bottle of wine or a baseball card is. Meanwhile, while the rest of the world is moving forward. I noted in my blog almost two years ago that Europe passed MiCA and now in 2024 is has been put into effect. The UAE and Asia are incredibly friendly. Qatar has a new framework. Even Russia is now getting on the train. What have we done since 2022? Well, the industry succeeded despite ourselves mostly due to our judicial system. We could have taken two years to get ahead – we didn’t. The US has always been a leader in innovation but here we have been a boat anchor. Unlike the internet we have NOT been leading this charge and, if we don’t embrace this industry our talent will simply go overseas to more friendly environments.
- Replace Gary Gensler One of the keys to the above is that we need a new SEC chair. Fortunately, it looks like both candidates are aligned with this, as Trump has publicly stated he would do so and recently Kamala’s organization has openly vetted two candidates to replace Gensler as SEC Chair. A crypto friendly SEC chair will change everything.
- Provide clarity about what crypto assets are: Up until this point, in general, we have seen the SEC and CFTC fighting for jurisdiction. And while mom and dad have been fighting the US has been losing ground across the board. Fortunately, we have legislation that is on the table with FIT-21 which would provide clarity on what is a commodity and what is a security. (Our view is that most legitimate crypto assets, unlike the SECs assertion, are NOT securities.) This is a start, and FIT-21 is a good step forward, but we need to understand this is new technology that will require new governance. In my view most crypto assets are production capital, as noted in my Blockworks article from last year. Let’s stop trying to wedge innovation into the 100-year-old framework that is the Howey test.
Ultimately this is a non-partisan issue. Blockchain and crypto are a part of the new innovation stack (which also includes AI, Robotics and IoT), and innovation is good for America. By stopping the FUD, ending partisanship, and promoting innovation, we can regain a leadership position in these technologies and garner their benefit at home and also in the world. We need informed elected representatives and we’re doing our small part where able. Personally, inside of this commitment have made myself available to the offices of multiple senators and office holders with no agenda other than education. I’m hopeful that through continued education of our leaders we well get policies that promote innovation across the board, allowing us to be highly relevant in this new era, prevent our innovators fleeing the country in search for more friendly environments and, ultimately allow all of us to benefit from the future that is now unfolding.
In Closing
Data is looking good. Politicians are embracing. And the 2024 elections are almost in the rear-view mirror. Since we know markets hate uncertainty, once we have a newly elected president we’l be over the final speed bump in the way of what we expect will be a historic Supercycle in our space. It’s what we’ve all been waiting for. And, it looks like we’re just… about… there!
That’s all for now. Until next time be well, stay safe, and I’ll keep Decrypting Crypto for you!