The most popular cryptocurrency in the world, Bitcoin, has traded to record levels, breaching a key US$100,000 threshold amid this rekindled confidence.

A shift in US leadership is expected to bring significant changes and opportunities for the digital assets industry – driven by a more favorable regulatory environment and increased institutional support.

Regulatory clarity and support

One of the most anticipated changes under the new administration is the potential for greater regulatory clarity.

Trump had already expressed his intention to fire Gary Gensler, the head of the US Securities and Exchange Commission (SEC), who is known for his skepticism about cryptocurrencies. Gensler has announced his intention to resign when Trump takes office next month, saving him the trouble, so the path is clear for someone more supportive to take the reins as the market regulator. This move is expected to pave the way for a more crypto-friendly regulatory framework, which could benefit the entire digital assets ecosystem.

While there has been much speculation around who would take Gensler’s job, including several executives from the cryptocurrency industry, Trump’s nomination at the time of writing is former SEC Commissioner Paul Atkins. Atkins runs advisory firm, Patomak Global Partners, and advises companies on navigating crypto issues. He is well known for supporting looser cryptocurrency regulations.

Supporters of digital assets are hopeful that a new generation of top market watchdogs will help bolster the industry's growth trajectory.

Institutional adoption and market growth

The new administration's policies are also expected to facilitate greater institutional adoption of cryptocurrencies. Although unlikely, its commitment to creating a Strategic Bitcoin Reserve through US Treasury purchases has already generated positive momentum in the market.

Additionally, continued flows into spot exchange-traded fund (ETF) products and the approval of listed options – standardized financial derivative contracts based on these ETFs – have set the stage for further market expansion.

Under Trump, the US is expected to make it easier for businesses to operate in cryptocurrency. This includes providing substantial banking support for cryptocurrency businesses, contrasting with the banking-access denial seen under the existing administration.

Such support could lead to broader adoption of public blockchains – secure, immutable, decentralized digital ledgers that operate using cryptocurrencies – by financial services companies.

Tokenized assets – digital representations of real-world assets, such as funds or securities, traded on blockchain platforms – may also become more popular.

Global competitiveness and market dynamics

The new administration's pro-cryptocurrency stance will likely enhance the US's global digital assets market competitiveness.

With fewer regulatory hurdles, the home of Silicon Valley may regain its position as a leading hub for cryptocurrency innovation and investment. This shift could also impact other markets, such as the UK, which may face increased competition as the United States strengthens its position.

Despite this positive outlook for the industry, it is important to acknowledge the inherent volatility of cryptocurrency markets. While market sentiment is currently strong, any broad-based risk-off event could result in a near-term pullback.

Nevertheless, the overall trend points towards continued strength and support for cryptocurrencies next year.

Important information

Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.

Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.

AA-111224-187043-1