History proves: The copycat season is coming, and the 12 months after the election are still the golden period of the crypto bull market

Original title: Republican Victory Ushers in a New Era for Crypto

By Kelvin Koh, Spartan Group

Compiled by: Husband, Odaily Planet Daily

The 2024 U.S. presidential election has become one of the most closely watched elections in recent years. Although most people expected the election to be fierce, the results surprised many. Not only did Trump convincingly win the presidential election, but Republicans also secured majorities in the Senate and House of Representatives. Such a landslide victory would give Republicans enough political leverage to push for multiple changes in the coming years. The cryptocurrency space is expected to undergo significant change, and we believe the next 12 months will be a positive period for cryptoassets.

What makes the 2024 election different from previous ones is that there is a "crypto agenda" in this election, and the winning president and his core team of advisers are friendly to cryptocurrencies. Cryptocurrency companies have heavily supported Trump and key Republican candidates through donations. It’s no surprise, then, that the crypto industry is one of the main beneficiaries of this Republican sweep.

There has been a lot of discussion about what this election will mean for the crypto industry, but here are a few of the main impacts:

• Changes in SEC Policy. Under the leadership of Gary Gensler, the SEC and other appointees in the Biden administration have implemented aggressive regulations on the crypto industry. Despite repeated industry calls for regulatory guidance, the SEC has persisted in managing through enforcement actions. During Gensler’s tenure, more than 2,700 enforcement actions were initiated and fines totaling $21 billion were issued. This makes it difficult for many projects to do business in the United States. Trump made it clear during the campaign that he would replace Gensler if elected. Sure enough, last week Gensler announced that he would resign as SEC chairman on January 20, 2025. Several candidates have been nominated to take over, and they are generally seen as more supportive of the crypto industry. This means that existing enforcement actions may be reversed and the SEC will take a more collaborative regulatory approach.

• Improvement of the parliamentary environment. In the past, one of the challenges faced by the crypto industry was that it was difficult to pass any favorable legislation in the U.S. Congress because most lawmakers either lacked understanding of cryptocurrencies. However, following this election, approximately two-thirds of members of Congress are considered pro-cryptocurrency. This will likely lead to a regulatory framework that supports innovation, making it easier for projects to finance, and clearing the way for institutional capital to enter the crypto space.

• Proposal for a strategic Bitcoin reserve. During the campaign, Trump told his crypto supporters that if elected, he would push for the establishment of a strategic Bitcoin reserve rather than letting the U.S. government continue to dispose of previously seized Bitcoins. The proposal quickly gained traction after the election. If this proposal comes to fruition, the market will begin to speculate whether this means that the US government will become a net buyer of Bitcoin rather than a seller. If MicroStrategy alone can influence the price of Bitcoin, imagine the impact of the US government establishing a strategic Bitcoin reserve. More importantly, how will other countries react? Will they come up with similar plans?

• DeFi support. Even before the election, the Trump-backed team had launched World Liberty Financial in September 2024, aiming to provide decentralized lending services and implement governance through the native token WLF. The project has raised more than $50 million to date, with the latest investment coming from crypto entrepreneur Justin Sun, who invested $30 million this week. WLF plans to raise a total of $300 million. Whether it ultimately raises $300 million or $50 million, the significance of this project is far greater than its dollar amount - it provides a huge inspiration to DeFi developers and innovators. More importantly, this kind of DeFi project supported by the incoming US president will have a profound impact on the entire industry.

Each of the above events on its own is enough to have a significant boost to the crypto market, but the combination of these events has an even more profound impact on the crypto industry. The market has yet to fully reflect the potential impact of these changes, which is why the US media calls this period the “Golden Age of Crypto”.

In addition to all of the above, Trump also expressed his desire to make the United States the “crypto capital of the world.” To some extent, the United States is already the de facto crypto leader. Many major infrastructure projects, some of the largest blockchain infrastructure companies, and decentralized applications originated in the United States. The United States also has the world's largest licensed cryptocurrency exchange, the largest crypto investment bank, and the largest Web3 venture capital pool. In addition, the United States accounts for approximately 40% of the world’s Bitcoin mining computing power (compared to 17% in 2021), becoming the largest center for Bitcoin mining, partly due to policy changes in China. Most global crypto transactions are also denominated in U.S. dollars, and major stablecoins are pegged to the U.S. dollar. As a result, the United States is already the global crypto center in many ways. However, if the US government plans to consolidate or further expand its dominance, what does this mean for other governments, especially major financial centers such as London, Tokyo, Dubai and Hong Kong? More importantly, can Europe afford to miss out on the Web3 era of innovation and fall behind again after the Web2 era?

Some may question whether Trump will actually follow through on these promises, but I think there's a good chance he will. Trump doesn’t play by traditional rules, and the political leverage from this election victory is powerful. In addition, Trump is surrounded by two crypto-native advisers – Elon Musk and JD Vance. New Commerce Secretary Howard Lutnick also serves as chairman and CEO of Cantor Fitzgerald, which just acquired a 5% stake in Tether, the issuer of the world’s largest stablecoin USDT. Coupled with a more friendly pro-crypto Congress, it shouldn’t be difficult to push these initiatives forward.

Historical data: Cryptocurrency prices perform strongly in the 12 months

following the US election, with altcoins outperforming Bitcoin

Against the above background, it becomes particularly important to discuss the impact of all this on crypto asset prices. As can be seen from the table below, the 12 months following the US election have historically been a period of strong price performance for crypto assets.

There are two main observations here:

• Regardless of who wins the presidential election and what the interest rate environment looks like, cryptoassets have performed extremely well in the 12 months following the U.S. election. We attribute this to two factors:
  a) The clarity brought by the election results and optimism about the new government;
  b) Continued impetus for the Bitcoin halving cycle/crypto cycle.

• In the 12 months following the past two elections, altcoins (represented by ETH) have returned approximately 3x the returns of Bitcoin.

As of 30 days after the 2024 election, Bitcoin is up 46% and Ethereum is up 58%. We believe there is still significant upside potential over the next 11 months.

To better understand the opportunity for altcoins, let’s look at the chart below, which shows how altcoins are performing relative to Bitcoin. As you can see, there are stages in the cycle where altcoins far outperform Bitcoin. We call these phases “altcoin cycles” or “altcoin seasons.” The last major altcoin cycle occurred in January 2021 and peaked in November 2021. The last cycle began in February 2017 and peaked in January 2018.

Notably, these altcoin cycles roughly overlap with the 12-month period following the election. We believe the main reasons are strong price performance in the early weeks after the election and a shift in investor sentiment towards risk appetite. Additionally, this trend has attracted retail funds into the crypto asset class, who tend to prefer riskier small- and mid-cap tokens because they are not subject to liquidity constraints from institutional investors. Additionally, altcoins tend to underperform at this point in the cycle, making their risk-reward ratio more attractive compared to large-cap tokens. The same is true in this cycle.

If this historical relationship holds true, then we should expect the altcoin season to begin soon.