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Johnnie Izquierdo for The Washington Post A man wears a ‘Make Bitcoin Great Again’ hat at the 2024 Bitcoin Conference in July in Nashville.
Special to The Washington Post · Adam Lashinsky
11:47 JST, November 21, 2024
The election is over, and bitcoin is on the march. A spasm of enthusiasm over the election of Donald Trump has sent the most popular cryptocurrency to within striking distance of $100,000 per coin for the first time.
Even the most strident critic of cryptocurrencies – I qualify, having written repeatedly why bitcoin and its even-less-savory ilk should scare the bejesus out of ordinary investors – must acknowledge that the landscape has changed. Under Trump, once a skeptic and now a booster of cryptocurrencies, the newfangled digital assets are poised to make another breakout run.
The reasons have everything to do with politics and hype, and nothing at all with any new rationale for the worth of cryptocurrencies. They have almost no value in the traditional sense of the word. Yet the prospect of severely diminished regulatory scrutiny under a second Trump term and renewed promotional activity by well-heeled backers promises to become a self-fulfilling prophecy for the collection of hucksters who fancy themselves the “crypto industry.”
Even after years of promises, there still are few legitimate uses for cryptocurrencies, no matter what crypto cheerleaders insist is an inflation hedge, a store of value, or a better form of international remittance. Or, as one wag put it to me: “No one has come up with a use case for owning bitcoin other than owning bitcoin.”
That’s not the whole story. Bitcoin and some other cryptocurrencies have proved valuable for three buckets of illicit financial transactions: criminal activity, terrorism and money laundering. The last of these is certainly real and possibly even desirable, depending on your point of view: The Wall Street Journal recently reported that Chinese investors are storing large amounts of cryptocurrencies on hard drives to evade their country’s restrictions on moving assets overseas.
Trading cryptocurrencies has been hampered in the United States by regulators trying to protect individual investors. That’s one reason Trump’s return to Washington is so significant. Simply replacing Gary Gensler with a more crypto-supportive chair of the Securities and Exchange Commission is certain to release the feral animal spirits that have been contained to date.
Gensler has been locked in a battle with cryptocurrency backers, likening their offerings to stock issuances that require securities registration. Whoever Trump taps to head the SEC will likely push to treat these assets like commodities such as gold or pork bellies rather than stocks and bonds. That’s in part because commodity regulators focus mostly on fraud rather than investor protection, and as such cryptocurrency issuers would have a much freer hand in a more lightly regulated marketplace.
Trump changed his mind on cryptocurrencies for the same reason he does most things: money. Crypto enthusiasts pumped upward of $135 million into backing candidates for office this year who supported crypto-friendly policies. Trump himself has also gotten in on the game. In the fall, during the middle of the presidential campaign, he and his sons announced a new crypto venture called World Liberty Financial. So far, the entity has failed to reach its initial fundraising goals.
Trump also has surrounded himself with crypto supporters. His choice to run the Commerce Department is Howard Lutnick, head of the financial firm Cantor Fitzgerald. That firm hosted a gathering for the faithful in Miami last week, the Crypto, Digital Assets, and AI Infrastructure Conference.
Among this crowd, one presently fashionable idea, which Trump endorsed on the campaign trail, is a strategic bitcoin reserve, similar to the country’s strategic petroleum reserve. It’s a nonsensical concept, of course, somehow tied to the argument that America needs to somehow stay ahead of other countries in the hoarding of an asset no one needs. It’s telling, by the way, that the United States already holds significant amounts of bitcoin – most of which has been seized in criminal cases.
The upshot of all this has been a been a real Trump bump for crypto. The price of bitcoin is now around $94,000, up from about $40,000 in January. Shares of Coinbase, the largest exchange for trading cryptocurrencies – and a target of an SEC lawsuit alleging that it offered unregistered securities – are up by nearly 44 percent in the last month. There is no doubt there will be more demand for crypto if some of the forces holding it back are removed.
None of this, however, means cryptocurrencies will be a safer investment than they were before. If anything, they will become more dangerous. In their short lifespans, digital assets have been subject to wild price swings, given that they trade according to emotion more than anything else. A big rise now with fewer regulatory protections promises only more volatility in the future.
In that regard, bitcoin resembles what’s been going on elsewhere in the investment world. In his annual letter to shareholders this spring, Warren Buffett lamented the “casino-like behavior” that didn’t exist when he started his career. “The casino now resides in many homes and daily tempts the occupants.” Speaking of Wall Street promoters, Buffett wrote: “Whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone.”
That someone, in Trump’s second term, will be the crypto industry.
