Interview with Ausbiz: How Trump’s Potential Presidency Could Shape the Crypto Market

Read more in a recent interview with Jon de Wet, CIO of Zerocap, on Ausbiz TV.

23 July  2024: The crypto market has always been sensitive to political events and regulatory changes. Recently, the news of Joe Biden dropping out of the US Presidential contest (The Guardian) has stirred significant volatility in the cryptocurrency space. With Donald Trump now appearing as a frontrunner, many investors are evaluating the potential impacts on the crypto market. In a recent interview on Ausbiz  Jonathan de Wet, CIO at Zerocap, delves into the Trump crypto market impact, analyzing its immediate effects on Bitcoin and other cryptocurrencies, while also discussing broader implications for the market.

Initial Market Reaction to Biden’s Exit

The announcement of Joe Biden stepping down from the presidential race initially led to a sharp drop in Bitcoin prices. Jonathan De Wet, CIO at Zerocap, noted to Ausbiz that “Bitcoin prices did come under pressure after news broke that Joe Biden will be dropping out of the presidential race” . This reaction was primarily driven by the uncertainty that typically accompanies such significant political shifts.

However, this decline was short-lived. The market quickly recovered as investors began to speculate on the increased likelihood of a Trump presidency. “We did get the initial drop from the Biden announcement. But now, of course, the markets are rallying once again in crypto land, and a Trump presidency is great for Bitcoin”, De Wet explained. This quick turnaround highlights the dynamic and often unpredictable nature of the crypto market.

Trump’s Constructive Stance on Cryptocurrency

One of the key reasons for the optimism surrounding a potential Trump presidency is his administration’s recent stance towards cryptocurrencies. Historically, Trump was not a supporter of crypto. However, the changing political landscape and the growing number of crypto holders among swing voters have led to a shift in his approach.

Jonathan De Wet noted, “Trump has already announced that he will release Ross Ulbricht, the founder of the Silk Road, who’s serving two life sentences. This is symbolic of his stance on crypto” . This move is seen as a positive indicator for the regulatory environment surrounding cryptocurrencies, suggesting that a Trump administration might adopt more favorable policies towards digital assets.

Market Drivers and Influences

Beyond political events, the crypto market is influenced by a range of factors. Jonathan De Wet emphasized to Ausbiz that it is a flow-driven market, where order flow repeatedly affects performance. Recent incidents such as Germany liquidating Bitcoin from a pirate movie site and the Mount Gox disbursements have had notable impacts on the market (Zerocap).

Moreover, the presidential campaign itself is a significant driver. As De Wet pointed out, “We’re getting positive news on the potential Trump camp and we’re getting this rally. The rally is just on the back of probabilities changing and that being reflected in order flow” . This highlights how political developments can influence investor sentiment and market movements.

Institutional Adoption and Venture Capital

Despite the volatility, there are several positive trends in the crypto space that bode well for its future. Venture capital funds are increasingly backing early-stage crypto projects, and private equity involvement is growing. “We’re seeing more private equity activity in the space. And if you look at just the Bitcoin ETF and the Ethereum ETF that’s coming up, there’s a lot of institutional adoption and general positivity in the space” , Jon explained to Ausbiz.

The potential listing of a Solana ETF by VanEck is another example of the growing institutional interest in cryptocurrencies . Such developments are crucial for the long-term growth and stability of the market, providing a solid foundation for future investment.

Cybersecurity Concerns and Regulatory Challenges

While the crypto market has many positives, it is not without its risks. Cybersecurity remains a significant concern, as highlighted by the recent hack on India’s largest crypto exchange. This incident resulted in the loss of $230 million in customer assets, showcasing the vulnerabilities of exchanges using hot wallets (Decrypt).

De Wet explained, “You get these cybersecurity incidents in crypto and non-crypto. Yes, it’s India’s largest crypto exchange. It held customer assets in hot wallets, which basically means there’s a multi-sig wallet where multiple directors need to sign off on any transfer funds” . Such breaches underscore the importance of robust security measures and the risks associated with certain types of custody solutions.

India’s regulatory landscape also poses challenges. The country’s heavy taxation and restrictions on international crypto exchanges create a complex environment for crypto investors (CoinDesk). De Wet noted, “India introduced a 30% tax on any transfers and banned global crypto exchanges from operating in India. This is not really going to help the case for crypto in India itself” .

Final Considerations

The Trump crypto trade illustrates the significant impact that political developments can have on the cryptocurrency market. While the initial reaction to Biden’s exit was negative, the market quickly rebounded on the prospect of a Trump presidency. This potential shift in leadership is seen as favorable for cryptocurrencies, given Trump’s recent constructive stance.

However, the market remains influenced by a variety of factors, including order flow, institutional adoption, and cybersecurity concerns. As the crypto space continues to evolve, it will be crucial for investors to stay informed about these dynamics and navigate the associated risks and opportunities .

Disclaimer

This article includes a summary of content originally published in Ausbiz. The information is intended for informational purposes only. Zerocap does not endorse or approve any specific content or viewpoints contained in the original articles.

Zerocap are not regulated by ASIC. Zerocap Pty Ltd is registered with AUSTRAC as a Digital Currency Exchange (DCE) service provider (DCE100635539-001) and is a Corporate Authorised Representative (CAR: 001289130) under an ASIC regulated licensee (AFSL 340799) to serve financial products and services.

www.zerocap.com