The cryptocurrency community sees a bright future with Donald Trump’s return to the presidency.
Bitcoin’s value exceeded $100,000 again this Wednesday, a feat previously achieved in early December. This rise is largely attributed to expectations of a more accommodating stance towards the crypto sector under Trump’s leadership.
“As the election neared, it became increasingly apparent that a Trump administration would likely foster a more favorable regulatory landscape for cryptocurrencies,” noted Eswar Prasad, a trade policy expert at Cornell University.
READ MORE: Bitcoin rebounds to record highs despite past market turbulence
Immediately following Election Day, Bitcoin experienced an 8% surge in value. Dogecoin, another digital currency often promoted by Trump’s ally Elon Musk, saw an even greater increase of over 18%.
With President-elect Trump actively incorporating crypto advocates into his administration, Prasad believes that “any future regulations concerning cryptocurrencies will likely be quite beneficial to the industry,” further stating that these developments have “significantly boosted cryptocurrencies as investable assets.”
Recent appointments, such as naming crypto supporter Paul Atkins as the prospective SEC chair and appointing former PayPal executive David Sacks as the “AI and Crypto Czar,” suggest a clear intention to reshape American policy in favor of cryptocurrency.
Despite previous skepticism, Trump pledged in June to position the U.S. as the “crypto capital of the planet” and proposed creating a national “strategic reserve” of Bitcoin. During a keynote address at a Nashville Bitcoin conference in July, he promised that crypto regulations would be drafted by “people who love” the industry. The Republican National Committee platform now includes pro-cryptocurrency language, and the Trump campaign accepts crypto donations. Trump and his family also support their own crypto project, World Liberty Financial, which recently secured a $30 million investment from crypto entrepreneur Justin Sun.
“We are optimistic that a Trump administration, along with a more pro-crypto Congress, will make substantial progress in establishing the foundational elements of an effective regulatory framework for the crypto markets,” said Faryar Shirzad, chief policy officer at Coinbase, a leading cryptocurrency exchange.
FILE PHOTO: Republican presidential nominee and former U.S. President Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, U.S., July 27, 2024. Photo by REUTERS/Kevin Wurm
Shirzad also noted that Trump’s reelection, as a candidate who actively sought the cryptocurrency industry’s endorsement, served as “vindication” for the sector.
Cryptocurrency represents a digital form of currency intended for online use, operating through decentralized networks and lacking backing from governments or banks. Bitcoin, the most well-known cryptocurrency, was established in 2009. Despite growing popularity in recent years, most Americans still do not consider it a secure investment.
Initially, advocates emphasized cryptocurrency’s privacy features and its role as an alternative currency outside the control of national governments and global financial institutions. Cryptocurrency allowed users to engage in transactions that were, theoretically, untraceable by authorities or financial entities. This anonymity also attracted criminal elements.
Today, the primary use of cryptocurrency is investment rather than everyday transactions. However, critics caution that the inherent volatility of the industry makes it akin to gambling.
Trump’s perspective on cryptocurrency has evolved since 2018, when he dismissed it as “highly volatile and based on thin air.” Three years later, he described Bitcoin as seeming like “a scam” during a Fox Business interview, labeling cryptocurrencies as a “disaster waiting to happen.” He also voiced concerns about their potential to weaken the U.S. dollar’s international standing.
Experts now suggest that Trump’s more recent pronouncements will likely lead to more transparent, and potentially less restrictive, regulations for the industry, which could boost currency values and wider adoption.
Here’s what to keep an eye on:
The Push for (Limited) Regulation
Gary Gensler, the current SEC chair appointed by the Biden administration in 2021, has expressed skepticism regarding the cryptocurrency industry. (Trump had pledged to dismiss Gensler, whose term continues until 2026, on “day one” of his administration, though Gensler recently announced his resignation in January.) Under Gensler, the SEC has classified numerous cryptocurrencies as securities, placing them under the agency’s regulatory purview. The SEC has pursued legal action against several crypto exchanges, including Coinbase, for failing to register as security exchanges, brokers, or clearinghouses. Further lawsuits have targeted cryptocurrency exchanges like Binance, alleging artificial inflation of trade volumes, improper service to U.S. customers, and misuse of customer funds.
The industry welcomed the nomination of Atkins, a former SEC board member and cryptocurrency lobbyist, to lead the SEC. Critics fear that Atkins will work to shield crypto from regulation, particularly by avoiding the classification of cryptocurrencies as securities, which would remove them from the SEC’s jurisdiction.
Despite potential regulatory concerns, the cryptocurrency industry is relatively new. Established players like Coinbase have expressed a desire for clear regulatory guidelines to create predictability.
“Our objective is to establish clear national rules for crypto markets,” stated Shirzad.
Prasad suggests the industry welcomes regulation “because many individuals and institutions are currently hesitant to engage in cryptocurrency-related activities.” Cryptocurrencies are known for their volatility, offering the potential for rapid gains but also the risk of equally rapid losses. Furthermore, the industry has been susceptible to fraud and, especially in its early stages, was associated with illegal activities, including organized crime.
“Like any industry, the cryptocurrency sector would benefit from the legitimacy that comes with government regulation,” Prasad explained, adding that the industry desires “light-touch regulations” that do not impede profitability.
The cryptocurrency industry has also been advocating for trading access on U.S. financial markets. In January, the SEC approved 11 exchange-traded funds (ETFs), which allow trading of shares tied to Bitcoin’s price.
This announcement pushed Bitcoin’s price to a previous record high of $47,000, signaling renewed interest in cryptocurrency after a period of market instability, exemplified by the collapse of FTX in 2022.
“[The SEC approval] provided cryptos with increased legitimacy as financial assets. The SEC’s approval of these financial products reassured retail investors about the legitimacy of some of these offerings,” Prasad noted.
Shirzad added that the industry prefers cryptocurrencies to be recognized as commodities, placing them under the regulatory authority of the Commodities and Futures Trading Commission (CFTC), which is considered to have fewer regulatory powers than the SEC.
“If you are only trading securities, then you should be regulated by the SEC. For trading commodities… you should be regulated by the CFTC. It simply depends on the instruments offered,” Shirzad explained.
Establishing a Crypto Strategic Reserve Fund
Some cryptocurrency proponents have suggested that the U.S. should establish strategic reserves of cryptocurrencies, like Bitcoin, a concept that Trump has endorsed.
A strategic Bitcoin reserve would serve as a reserve fund for emergencies or periods of instability, similar to the U.S. strategic oil reserve, which acquires crude oil when prices are low and stores it for future release when prices increase.
Critics argue that the analogy to oil is flawed, as cryptocurrencies lack the strategic significance of fuel for transportation and energy production.
During the cryptocurrency conference in Nashville, Trump advocated for the U.S. government to cease auctioning off Bitcoin seized by law enforcement and instead add it to a strategic reserve.
Brian Blank, finance professor at Mississippi State University, suggests that a cryptocurrency strategic reserve could mitigate value fluctuations.
“The involvement of an organization as large as the U.S. federal government, holding a significant amount of an asset, is likely to stabilize it,” he said.
Blanks also stated that a strategic Bitcoin reserve would benefit the cryptocurrency industry by increasing its mainstream appeal, thereby driving greater demand among a wider audience.
“If the U.S. holds some of it, that would legitimize it in some ways. Being part of the mainstream may increase its value,” Blanks said.
Positioning the U.S. as the ‘Crypto Capital of the World’
At the July conference in Nashville, Trump expressed his desire to make the United States “the crypto capital of the world.” More recently, at a Bitcoin conference in the United Arab Emirates, Eric Trump predicted his father would be the “most pro-crypto president in the history of America.”
“We will establish a clear roadmap, and hopefully the rest of the world will follow. We should lead by example, as Americans,” Eric Trump stated in a CNBC interview.
Cryptocurrency industry analysts and experts believe this vision could become a reality if the Trump administration implements more favorable regulations and his enthusiasm encourages wider adoption of cryptocurrencies.
An illustration featuring U.S. President-elect Donald Trump holding Bitcoin is displayed outside a cryptocurrency exchange store after Bitcoin soars above $100,000, in Hong Kong, China, December 5, 2024. Photo by REUTERS/Tyrone Siu
Shirzad criticized regulators under the Biden administration for driving “significant portions” of the cryptocurrency industry out of the country. He believes the Trump administration will reverse this trend.
“We can regain [the U.S.’s] leadership position as a hub for digital asset innovation,” Shirzad argued, noting that other economies have made substantial investments “to try and surpass us in the digital asset market.”
“President Trump’s political commitment is highly gratifying,” he added.
Increased American investment in cryptocurrencies would translate to a larger customer base for the industry, potentially leading to greater demand and growth. However, it also presents increased risks for new investors.
“My major concern is that retail investors are being drawn into this asset class without fully understanding the associated risks and their capacity to tolerate such high levels of risk,” Prasad cautioned.
“The endorsement of cryptocurrency-related products by the new president and his associates might lead individuals to believe that these assets are similar to traditional stocks or bonds. This is a concerning misconception.”
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