Entering a Digital Golden Era

The digital asset industry is on the verge of a golden era. Crypto in America is likely to experience a refreshed regulatory approach-coupled with new majorities of supporters in both chambers of Congress and in the White House. The industry flexed its political muscles and sent potent shots across the bows of its enemies in ways that will echo across the political spectrum. The oppressive headwinds that impeded industry progress and fattened legal bills over the last 4 years have abated, with the crypto industry now running downwind in the world's largest capital market.

About Tuesday Night

President-elect Donald J. Trump has made history-becoming the second president ever to win a second, non-consecutive term in office. Grover Cleveland is the only prior president to accomplish this feat when he defeated Benjamin Harrison in 1892 to win a second term. Then, the anti-tariff, pro-gold Democrat retook power for a 2nd non-consecutive term in 1892, while today the pro-tariff, pro-Bitcoin Republican won a 2nd non-consecutive term in 2024. History often rhymes.

Trump's victory was also historic in modern times. He will expand his electoral college votes to 310+ vs. 306 in 2016. He becomes the first Republican to win a majority of the national popular vote since George W. Bush in 2004. Trump swept the "Blue Wall" states of PA, MI, and WI just like in 2016, but he is also likely to win Nevada, which Clinton won in 2016. In Florida, Trump won by a whopping 13% (vs. Biden +7% in 2020 and Clinton +30% in 2016), though a lot of this can be attributed to demographic changes in the state. This heatmap from Bloomberg shows every county with 95%+ reporting and change 2020 vs. 2024 for Republican vs. Democratic presidential candidate. That's a lot of red.

Source: Bloomberg

The Senate flipped Republican and is likely to resolve with Republicans controlling 54 seats. The House will take longer to know, but Republicans are slightly favored to maintain control of the lower chamber.

Some other takeaways from the election:

• Crypto flexed its political muscles. In addition to very publicly working to extract a broad and deep crypto agenda from President-elect Trump, the industry made broad inroads of support across the House and Senate. The highest profile victory came with Bernie Moreno (R-OH) unseating Sherrod Brown (D-OH). Crypto PACs spent tens of millions of dollars in the race to defeat Brown, the current chair of the important Senate Banking Committee. Knocking off Brown, an ally of Elizabeth Warren, sends a strong message that opposing crypto is a losing position politically.

• Trump enters his second term. Presidents are notorious for attacking more complicated, farther afield issues in their second terms as they work on their legacy without the burden of winning another term. His level of victory also provides a bigger mandate than 2016, and Trump enters office with the support one of perhaps the most diverse Republican voter coalitions in decades. This enhances the likelihood that Trump will work on big ideas, which could include significant modernization of the financial system.

• Trump's team is very supportive of the digital asset industry. Trump's inner circle is extremely supportive of digital assets, and many of them have disclosed ownership of Bitcoin. VP-elect J.D. Vance has disclosed that he owns Bitcoin, Vivek Ramaswamy has been a vocal supporter of the industry throughout the campaign cycle, RFK Jr. owns Bitcoin and has been extremely and thoughtfully supportive for at least 2 years, Transition Team Co-Chair Howard Lutnick said he and other Cantor Fitzgerald own "shedloads" of Bitcoin (and Cantor banks Tether), and many other major donors are either directly involved in crypto or have expressed significant positive attitudes to the asset class and industry. And don't forget that Trump himself has issued NFTs and launched his own affiliated DeFi protocol, World Liberty Financial. The pro-crypto nature of his team, family, and donors increases the likelihood that Trump follows through on his campaign promises to the industry.

What to Expect in Washington

Let me paint a picture for what is likely to happen for crypto policy:

• Bank regulators. Trump immediately appoints new acting Comptroller of the Currency at the OCC and new acting Chair of the FDIC. These agencies have prudential and oversight authority for banks and insured depositories. Perhaps within days, bank regulators could release guidance to specifically prohibit the unfair targeting of specific industries (Chokepoint 2.0) as they did when Trump first took office and they can certainly rescind existing interpretive guidance or letters that are negative for the industry-i.e., the joint letter from Jan 3, 2023. Within weeks or months, OCC is likely to release guidance specifically allowing banks to custody digital assets and use, operate, and interact with public blockchains and stablecoins. (Recall that Brian Brooks, Trump's former acting Comptroller, issued such interpretive letters in 2020).

• Market regulators. Trump elevates a sitting commissioner from both the SEC and CFTC to acting chair. While Trump pledged to "fire Gary Gensler," most constitutional scholars believe the President cannot fire a duly confirmed commissioner to an independent agency. However, the President can immediately designate an existing commissioner to become the acting head of the agency. In the near term following such a personnel change, some number of crypto enforcements will pause, some lawsuits will be paused or withdrawn, no action letters on specific topics or to specific projects could be issued, and the doors will open for industry and regulators to discuss sensible paths forward. More comprehensive rulemaking will take much longer, but the crypto industry is likely to receive quick exemptive relief, with the primary area being a relaxation of the SEC's stance on what constitutes a "security" and an "exchange." The posture is similar at the CFTC, but we will note that absent comprehensive market structure legislation providing definitive jurisdiction lines between the SEC and CFTC, it will be extremely important for both market regulators to have chairs that can work and produce progressive policy in coordination.

• Legislation in Congress. The biggest crypto policy agenda items in Congress are well known: market structure (clarifying the regulatory status and oversight bodies for digital assets) and stablecoins (legalizing and licensing the issuance of stablecoins). FIT21 passed the House with a large bipartisan majority in May of this year and will form at least the contours of future market structure bill efforts. The two parties are relatively close together now on stablecoin legislation, with the main disputes between Democrats and Republicans on House Financial Services being 1) whether only national banks can issue or whether there is a state pathway as well, and 2) which agency (or agencies) would assume prudential and oversight authority over those issuers.

  • Crucially, if the Republicans hold the House, we believe it is less likely that these bills will advance quickly in 2025. A unified Republican Congress is likely to use the first 100 days of 2025 focusing on tax reform, trade, and other issues-utilizing budget reconciliation to push GOP priorities. This does not mean that crypto legislation is unlikely to advance next Congress, but in a unified congress we do believe that it will take a back seat to other priorities-necessitating close coordination between Congress and the regulators on crypto policy. Our base case is that crypto legislating will shift to the back half of the 119th Congress allowing Cabinet officials and independent regulators to gain their footing before engaging with Congress on the policy matters.

• Energy policy. The Trump presidency, particularly if Republicans control both houses of Congress, will be extremely bullish for domestic energy and electricity production. This will be supportive for Bitcoin miners, datacenters, anyone with access to large amounts of electricity, in addition to energy producers themselves, of course.

What This Means for Market Participation

Easing of regulatory headwinds combined with specific interpretive letters, no action letters, or regulatory guidance is likely to dramatically expand access to crypto for institutional investors in America.

• The easing of SAB 121 applicability by the SEC in September, or in the case of an outright withdraw of the guidance, will pave the way for the world's largest custody banks to enter crypto. BNY Mellon achieved exemption from the onerous account guideline because its primary prudential regulator (NYDFS) did not object, but the OCC is the primary prudential regulator for national banks like Citigroup and JP Morgan. Given we are very likely to see a material shift in the OCC's posture to banks interacting directly with cryptos, these big banks will eventually have their opportunity to get more involved.

• Further institutionalization will in turn increase financing options for crypto assets, make spot crypto more available through existing institutional trading platforms and relationships, and raise the maturity level of the institutional crypto market generally.

• Relaxation of the SEC's applicability of Howey to digital assets, or alternatively the expansion of "crypto asset securities" that can be traded inside broker/dealers, will allow more entrants into the exchange space, including perhaps traditional financial institutions like banks, exchanges, or brokerages. Additionally, such a relaxation of the SEC's application of Howey could result in more spot-based crypto ETFs in the US.

• Clarity and permissiveness from regulators could allow traditional financial services companies and investors to operate onchain for the first time, bringing new opportunities for yield and other strategies.

• Expanded access to the public blockchain could also revolutionize trading efficiency, transparency, issuance, and other aspects of finance. Depending on regulatory posture and any legislation that is enacted, the merger of tradfi and defi may finally be upon us.

• Again, depending on the SEC's stance on Howey and token disclosures, we could see a wave of new types of tokens, even possibly equity securities, and existing tokens may add more equity-like features to enhance their value propositions. An expanded and improving asset ecosystem will be supportive to the liquid crypto hedge fund industry whose investible universe will both mature and expand. Improved token disclosure and issuance capabilities in the US will finally challenge or even reverse the existing SAFT-to-low-float-high-FDV regime which favors VC capital over liquid.

• On the venture side, it's possible that the IPO market will open more meaningfully to crypto-native companies, finally giving a pathway to realizing return on investments via exits. Today, the only venture-backed crypto startup to go public (other than a few SPACs) is Coinbase. By our estimation, there could be dozens of crypto firms looking to go public in the US if the conditions were right and the regulators were open.

Bitcoin Market Analysis

Bitcoin traded as low as $66,700 on Monday, November 4th, but has since risen 15% to make fresh all-time highs. As Trump's odds of victory increased on November 5th, bitcoin roared to new all-time highs and has hovered in the $75-76k area since. Despite the sharp move - 15% since Monday, 26% since October 1 - the market does not look overheated from a fundamental perspective. The "Coinbase Premium" returned dramatically on Tuesday night as Bitcoin rose on election news, turning positive for the first time in at least a month.

Futures & Funding

While futures open interest on crypto exchanges have pushed slightly higher to new yearly highs, funding rates are mostly unchanged, suggesting the moves have been mostly spot driven.

Bitcoin Options Market

Bitcoin options dealers are net short gamma between $54k and $84k, which will act to accelerate any move. To refresh, when dealers are short gamma, they typically hedge as price goes up by buying spot, or hedge when price goes down by selling spot. This effect can accelerate moves in either direction and increase volatility. Alternatively, when dealers are net long gamma, they do the reverse, selling into upward moves and buying into dips, reducing volatility. Our analysis suggests that current peak short gamma is at $70k, so the impact of this is moving down as BTCUSD creeps higher. That being said, many call owners of strikes in the current elevated range are in the money, so those investors could decide to roll forward at higher strikes, which would pull the short gamma to a higher strike range. The chart below shows our view of net dealer gamma positioning across all BTC expiries between November 7 and September 26, 2025.

Bitcoin Network Fundamentals

Stepping back, Bitcoin is right on track with its prior two bull-market runs. Measured from cycle low (2011: $2, 2015: $152, 2018: $3122, 2022: $15460), Bitcoin is right on-track with the 2017 bull run and just slightly lagging the 2021 bull run.

Looking at prior bull-market drawdowns, 2024's pullbacks have been milder than those during the 2021 and 2017 bull markets.

The Realized HODL Ratio is an indicator that measures the ratio between the 1 week and 1-2 year realized market capitalization HODL bands (the realized value of coins that last moved in those time periods). Higher ratios indicate an overheated market and peaks tend to align with market tops. The sideways action in 2024 in RHODL is more reminiscent off the sideways steps in 2019-2020 than any peaking activity, suggesting there is more room to run in the near and medium terms.

Bitcoin and Global M2

Bitcoin has historically reacted to changes in the global money supply. While the correlation is not unique to bitcoin, this is nonetheless worth watching, particularly if bitcoin begins to be used more as a hedging asset as Larry Fink has called for.

Outlook

An incoming Trump administration coupled with a robust Republican Senate that can confirm his agency appointees is bullish for regulatory relief to the crypto industry in America. We expect forms of exemptive relief to come quickly, with sturdier supportive regulatory frameworks taking more time to emerge. An easing enforcement environment coupled with progressive policy thinking will pave the way for traditional financial services companies and institutional investors to deepen their involvement with the asset class. This will challenge the moats of existing crypto infrastructure players but will also broadly support an expansion and maturation of the asset class. In this environment, we expect Bitcoin and other digital assets to trade at levels significantly above today's all-time high over the next 12-18 months.

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