For some reason, the media has convinced itself or spun a narrative that the incoming Trump administration will enact major pro-crypto reform. Somehow, Congress will have no trouble passing major legislation that will help crypto; nevermind that Trump’s track record at legislation is poor. Bitcoin has surged in recent weeks in anticipation of a more crypto-friendly regulatory landscape.
For example, this headline: How tech bros bought ‘America’s most pro-crypto Congress ever’.
Yes, I can totally imagine risk-averse House Republicans embracing the rewiring of the American financial system around Bitcoin, with arms wide open. You have to be on crack if you actually believe this. This is setting up to be one of the biggest disappointments ever. In addition to my usual shorting method, at $98,000 per Bitcoin I have placed long-term bets against Bitcoin in the expectation it falls to $60k or lower when it becomes apparent none of these promised reforms will materialize. There will be no strategic reserve, no regulatory clarity, no rollback of existing regulation. Unless it involves tax cuts, defense/war (more aid for Israel and Ukraine), or raising the debt ceiling, passing legislation is really hard for Republicans.
Also, crypto deregulation conflicts with existing Bush/Obama-era DHS policies. Such anti-money laundering laws and required ‘know your customer’ reporting are downstream of post-9/11 counterterrorism, and I don’t see congressional Republicans ever rolling these back. One of the biggest concerns of crypto has been the funding of bad actors or to bypass capital controls.
Either one of three things will happen: Trump will fumble the ball at crypto reform or never get to it, being sidetracked by other issues. Or it will be struck down, or diluted to such an extent as to still be disappointment. As the above article shows, pundits greatly overestimate the power of outsiders to reform Washington or affect policy.
It’s hard enough for the very people who are pulling at the levers of power to affect change; outsiders stand a much worse chance. If the goal is to reform society, Trump is unfortunately the worst person to do it in terms of effectiveness despite being really good at campaigning. The only hope is his advisers spoon feed him a nearly fail-proof plan, and then he acts on it without getting sidetracked.
And on a related note: Markets Misread Trump Win, Says Ex-Goldman Sachs Analyst: ‘Prospects Of Tariffs Not Good For Equities’.
Yet again, the financial media gets everything wrong by both overestimating the likelihood of crypto reform and overstating the possible deleterious effects of the tariffs. The reform will not happen, and the tariffs will be a snoozer, similar to in 2017-2019 during Trump’s first term. The overhyped or inevitable trade war with China never happened. From my post, Why Most Financial Analysis is Useless and can be Ignored:
The stock market would go on to surge from 2016-2019, until falling due to Covid, not anything specifically attributable to Trump’s economic/trade policy. This is not to defend Trump: similar incorrect predictions were voiced by the conservative media during Obama’s terms, such as predictions of hyperinflation, debt crisis, and dollar collapse, none of which came to be. Given that bear markets and recessions tend to be much briefer than bull markets, stocks tend to do well regardless of who or which party is in charge. Stocks do well in any administration, because stocks tend to go up over the long run.
It’s the exact same thing playing out here too. Given how wrong they were during Trump’s first term, the media have no credibility as far as I am concerned.