Two months into Trump's presidency, his economic, domestic, and foreign policies have begun to take shape.
In the cryptocurrency sector, his policies may have a profound impact on the market. The following is an analysis of his potential next steps:
1. Cryptocurrency policy
Improvement of the regulatory framework: The Trump administration is actively promoting the formulation of cryptocurrency regulatory policies to address the issues of unclear early regulatory frameworks and overlapping regulatory agencies. The latest cryptocurrency regulatory framework in the U.S. has returned to the main line of 'supporting innovative development', and it is expected that stablecoin and cryptocurrency regulatory legislation will be introduced in 2025.
Strategic crypto reserves: The Trump administration plans to establish strategic crypto reserves that include Bitcoin, Ethereum, XRP, Solana, and Cardano, indicating the government's recognition and importance attached to cryptocurrencies.
Advancement of the stablecoin bill: The U.S. Congress is reviewing (guiding and establishing the U.S. Stablecoin National Innovation Act), which aims to establish a new regulatory framework for stablecoin issuers, granting them legal status similar to that of traditional banks.
2. Impact on the crypto market
- Enhanced market sentiment: Trump's pro-crypto policies may further enhance market sentiment, attracting more traditional investors and institutional funds into the crypto space.
- Intensified competition in the stablecoin market: The USD1 stablecoin launched by the Trump family may intensify competition in the stablecoin market, especially in the fields of institutional investors and cross-border payments.
- Surge in Bitcoin prices: The crypto commitments made before Trump took office directly drove the rise of the crypto market, with Bitcoin prices expected to exceed $107,000 by the end of 2024, nearly a 100% increase since Trump's campaign.
3. Potential risks
- Regulatory uncertainty: Although the Trump administration has a friendly attitude towards the crypto industry, stablecoins involve cross-border payments and financial stability, which may trigger additional scrutiny from institutions such as the Federal Reserve and the Treasury Department.
- Market speculation sentiment: The involvement of the Trump family may exacerbate market speculation sentiment, leading to increased price volatility.
- Conflicts of interest: The Trump family is directly involved in crypto projects, while the Trump administration is promoting policies favorable to the crypto industry, leading some government ethics experts and political opponents to criticize this 'playing both referee and player' role.
4. Impact on dollar hegemony
- Consolidating the dollar's position: Both the Trump administration and WLFI emphasize that the launch of USD1 helps consolidate the dollar's dominant position in the global financial system, further promoting the dollar's use in international trade and payments.
- Impact on the traditional financial system: The efficient cross-border payment capabilities of stablecoins may challenge the status of existing financial intermediaries, affecting their revenues in the trillions of dollars in the short-term fixed income market.
5. Promotion of the DeFi ecosystem
- Promoting DeFi development: One of the goals of USD1 is to become an important part of the DeFi ecosystem, and WLFI plans to develop a decentralized finance platform convenient for ordinary people through collaboration with projects like Aave and Chainlink.
6. Summary
Trump's pro-crypto policies have injected new attention and vitality into the crypto market, potentially attracting more traditional investors into the crypto space and pushing the market further into the mainstream. However, these policies also bring new risks, including conflicts of interest, market speculation, and regulatory uncertainty. Investors need to remain rational and fully recognize the volatility risks of the market to avoid losses caused by blind following.
