As talk intensifies around Donald Trump returning to the presidency, there are rising concerns over the impact this could have on cryptocurrencies. Known for his unpredictable and assertive policy approach, Trump’s second term might bring significant changes to the crypto industry with a focus on deregulation, economic growth and an America-centric agenda. Whether through trade tensions or executive actions, Trump’s leadership could lead to both challenges and new opportunities for cryptocurrencies both in the USA and, indeed, globally. Moreover, renewed tensions with China could amplify Bitcoin’s appeal as a hedge against economic uncertainty whilst changes in tax and regulatory policies might reshape the way investors and institutions engage with digital assets. And the prospect of evolving institutional dynamics, such as expanded crypto adoption or new classifications for digital assets, highlights how deeply Trump’s decisions could influence the sector. So, could a second Trump term accelerate the mainstreaming of cryptocurrencies - or create new obstacles? The answer potentially lies in the intersection of policy, innovation and global market dynamics, and some Americans, such as Jason Meyers, Lead Architect of Auditchain, believes Trumps re-election will prove to be very positive for cryptocurrency prices.
Renewed trade wars: Bitcoin as a hedge
Source: TeamBlockchain
With Trump in office, renewed trade conflicts with China could once again unsettle global markets whereby positioning Bitcoin as a potential safe-haven asset. The demand for cryptocurrencies could now have an added stimulus, given the recent Shanghai court ruling that it is not illegal for Chinese citizens to own cryptos. However, known for his use of tariffs and trade restrictions, Trump's likely escalation of economic sanctions could create fresh volatility in global supply chains and financial markets. In this climate, Bitcoin’s decentralised, borderless attributes could make it an appealing choice for investors looking to hedge against market turbulence. Notably, during Trumps first term, trade disputes pushed Bitcoin’s appeal higher as a digital hedge, with its price often moving in tandem with heightened geopolitical risks. If history repeats, Bitcoin could solidify its position alongside traditional safe-haven assets such as gold, offering a digital store of value that transcends national boundaries and regulatory risks. This potential alignment with gold's behaviour could attract a new wave of institutional investors, further legitimising its role in diversified portfolios. The impact of renewed trade wars could also extend beyond individual and institutional investors - multinational corporations grappling with disrupted supply chains and fluctuating currency values might increasingly turn to Bitcoin and blockchain-based solutions for cross-border transactions. In turn, these innovations could reduce reliance on traditional banking systems, enabling faster and more cost-effective global trade settlements. A second Trump trade war would not just create market volatility - it might also accelerate the adoption of Bitcoin as an integral part of the global financial ecosystem, bridging gaps in commerce during times of geopolitical strife. However, the concern is: who really wins from a trade war? “No one will win a trade war or a tariff war”, a Chinese Embassy spokesperson to the US reported to the publication, Global Times, in response to Trump’s latest 10% additional tariff remarks.
Tax policy and cryptocurrency investment
Tax reforms could once again shape the cryptocurrency landscape in unexpected ways. Trump's previous tax policies, such as the 2017 Tax Cuts and Jobs Act, slashed corporate taxes and simplified income tax brackets for many Americans. But, according to the Centre on Budget and Policy Priorities, the 2017 Trump Tax law “was skewed to the rich, was expensive and failed to deliver on its promises.” If similar measures are introduced again, they could significantly impact crypto investors and the broader blockchain ecosystem; changes to capital gains tax treatments could encourage long-term holding of digital assets such as Bitcoin. And, by reducing taxes on long-term holdings, these policies might incentivise investors to “HODL,”(Hold On Dear Life) dampening short-term market volatility and fostering a more stable investment environment - such reforms would align well with crypto’s growing reputation as a long-term store of value, akin to digital gold. Corporate tax reductions could also encourage greater institutional investments in cryptocurrencies; by easing the tax burden, companies could have more capacity to invest in high-growth assets such as crypto. Financial institutions and tech firms might seize the opportunity to enhance their crypto portfolios or further invest in blockchain technology. Furthermore, energy policies and mining incentives under a potential Trump administration could have a profound effect on the cryptocurrency industry. His focus on energy independence may provide tax incentives for domestic Bitcoin mining, particularly if aligned with reforms that support US tech development; this could lead miners to relocate their operations domestically, benefitting local economies and enhancing blockchain decentralisation.
Finally, streamlining digital asset tax reporting could reduce barriers for both individual and corporate investors, making it easier for the US to compete as a hub for blockchain innovation.
De-regulation and institutional crypto adoption
If Trump continues to push for de-regulation in the financial and banking sectors, this could lead to a cascade of opportunities for crypto integration within traditional finance. Imagine a world where banks routinely offer crypto custodial services, enabling clients to buy, sell and store digital assets with the same confidence they have in traditional accounts. De-regulation could pave the way for such offerings, giving cautious investors a secure entry point into the crypto market. This shift would not only bolster adoption but also challenge fintech startups to innovate further, sparking healthy competition. The potential expansion of crypto investment products such as derivatives, ETFs and futures could also be game-changing. A less restrictive regulatory framework could give investors more ways to access cryptocurrencies and so diversify their portfolios. And these developments would signal a clear message - cryptocurrencies are no longer fringe assets but integral to mainstream financial markets. A less-regulated US could also entice international financial institutions to launch crypto operations within the country. The combination of a business-friendly climate and access to the world’s largest economy might foster innovation centres, where collaboration between government and fintech industries thrives. Such partnerships could help advance blockchain technology, streamline payment systems and promote digital identity solutions. By fostering competition and innovation, de-regulation could position the US as a leader in the global crypto race, encouraging a seamless fusion of traditional and digital finance whilst setting the stage for long-term economic growth.
Cryptocurrency regulation via executive orders
Executive orders could become a powerful tool for shaping cryptocurrency regulation. Trump’s past willingness to use executive actions to address complex issues suggests he might take a similar approach to digital assets, especially given his history of cynicism toward Bitcoin and its decentralised nature. During his first term, Trump expressed scepticism about Bitcoin and other cryptocurrencies, citing their borderless nature and potential to disrupt the dollar's dominance. This could lead to executive orders that explicitly classify cryptocurrencies - whether as securities, commodities or digital property. Such clarity could provide much-needed guidance to investors and businesses, fostering long-term growth in the sector. However, stablecoins, which Trump may perceive as direct competitors to the US dollar in global payments, could face tighter restrictions or guidelines, potentially stifling innovation in this area whilst encouraging advancements in decentralised finance (DeFi) and international blockchain ventures.
National security would likely remain a cornerstone of Trump’s policy and privacy coins such as Monero and Zcash, known for their enhanced anonymity, might face increased scrutiny under the guise of combating illicit finance. Furthermore, new reporting requirements or outright restrictions could reshape crypto market dynamics, nudging investors toward more regulator-friendly options such as Bitcoin or Ethereum. On a broader scale, Trump’s “America First” stance could influence global crypto trends - reduced reliance on foreign financial systems might inadvertently accelerate the internationalisation of cryptocurrencies as nations seek alternatives to dollar-based banking. Such shifts could spur innovation in blockchain technologies whilst decentralising the global financial order, so fostering a more diverse than ever crypto ecosystem.
Bitcoin and inflation: a renewed hedge narrative
Trump’s economic policies (centred on aggressive tax cuts and large-scale fiscal investments) could reignite concerns about inflation, especially in a post-pandemic economy still navigating fiscal recovery. Historically, increased government spending and expansive stimulus measures have raised fears of fiat currency devaluation. In such a scenario, Bitcoin could once again shine as a digital hedge against inflation.
Essentially, Bitcoin’s fixed supply of 21 million coins sets it apart from fiat currencies, which central banks can print at will - this scarcity has solidified Bitcoin’s reputation as “digital gold”, appealing to both retail and institutional investors seeking protection against a weakening dollar. Under a Trump administration characterised by bold economic initiatives, this narrative could attract even greater interest, so bolstering Bitcoin’s role as a store of value. However, the current landscape is more complex than during Trump’s first term - central bank digital currencies (CBDCs) are emerging as potential competitors to Bitcoin. And, whilst CBDCs aim to modernise traditional currencies, they lack Bitcoin’s decentralised nature and deflationary design. Investors wary of inflation and centralised control might still lean toward Bitcoin, viewing it as a purer alternative. Ultimately, Bitcoin’s ability to thrive will depend on whether it can maintain its appeal as a deflationary asset in a potentially inflationary environment shaped by bold economic moves and evolving financial technologies.
Notably, from trade wars to tax cuts, Trump’s previous economic policies had an undeniable impact on the crypto market - often in unexpected ways. They highlighted Bitcoin’s value as a borderless, decentralised asset during global tensions and spurred retail and institutional interest in digital currencies. Moreover, by shaking up traditional markets, these policies inadvertently boosted Bitcoin’s status as “digital gold” and a hedge against inflation. So, as we move forward, the interplay between government policy and the crypto market remains a critical factor in its evolution. Therefore, will future leaders embrace digital assets as tools for innovation - or see them as threats to control?
This article first appeared in Digital Bytes (3rd of December, 2024), a weekly newsletter by Jonny Fry of Team Blockchain.