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Good morning everyone,

This is the last Crypto Down Under newsletter before the US election. The election marks a turning point. For the first time, both candidates have taken a stance on bitcoin and digital assets, one (Donald Trump) is very positive and the other (Kamala Harris) is muted but friendly. In future elections, bitcoin and digital assets won't go unmentioned on the campaign trail. Bitcoin and digital assets will be part of the economic agenda that candidates will put forward.

But today's newsletter is also the last Crypto Down Under newsletter. I will be starting a new full-time role next week and I want to give it my undivided attention. Over the past year, I've written 52 newsletters and I hope you've enjoyed them as much as I've enjoyed writing them. For the last newsletter, I will give you my outlook on how I think the digital asset class will evolve after the election.

DISCLAIMER: This newsletter is not financial advice. It does not take into account your financial situation, is general in nature, and is for educational purposes only.

Also, this newsletter contains affiliate links. This means that I may receive a commission from them. But for Crypto Down Under, I only choose products I use myself and can recommend wholeheartedly. Don’t forget to do your own research.

1. What's the short-term impact of the election?

Over the past few days, bitcoin has rallied, pulling the entire digital asset class higher. On Tuesday, bitcoin broke above US$73,000 and came within striking distance of its all-time high of US$73,700.

Over the past few days, bitcoin has surged as crypto bull Donald Trump's chances of winning the election have improved. In the polls, Kamala Harris still leads, but only by a tiny margin (1.4%) and the lead is trending down. However, in the prediction markets, where people put their money on the line, a yawning gap has opened up: On the crypto prediction market Polymarket, Trump leads by more than 25 percentage points.

If Trump wins the election, the digital asset market will pop like a ball pushed underwater.

If Harris wins the election, the air will be taken out of the ball and we will see a setback.

2. Harris is less crypto-friendly. What happens if she wins?

As we move forward, people will come to appreciate that Harris has made inroads into the digital asset market. My read on Harris's stance on digital assets is that she understands that Joe Biden's approach to the asset class has been an unmitigated failure. (Which, with Biden still her boss, she can't say publicly, of course.)

Under Biden, the digital asset industry was served up with regulation by enforcement, which stifled growth and innovation and drove companies overseas. The symbol of this failed approach is FTX, a company incorporated in Antigua and Barbuda and headquartered in the Bahamas, which defrauded customers by misappropriating billions of dollars of their funds. In a trial of epic proportions, Samuel Bankman-Fried, the founder and CEO of FTX, was sentenced to 25 years in prison.

Harris has promised to support "a regulatory framework for cryptocurrency and other digital assets". That's vague, but it's also a way of saying that your boss's policies haven't worked without offending your boss.

3. Which areas of crypto will see the fastest adoption post-election?

In my view, the adoption of bitcoin and stablecoins will accelerate as these two products have found their product-market fit. The rest of the digital asset space could also do well (or even better), but more as speculative assets that are still finding their product-market fit.

If Trump wins, bitcoin will become a reserve asset, an idea Trump floated when he attended a bitcoin conference in July. The idea is being taken up by state pension funds. The pension funds of Wisconsin and Michigan have already invested millions in bitcoin ETFs, and Florida is considering doing the same. In short, bitcoin will become an asset on the balance sheets of governments, pension funds, and corporations.

The other sector I expect to take off is stablecoins. Stablecoins are cryptocurrencies that have a stable value, typically by being pegged to a currency such as the US dollar. Because their value is stable, their primary use case is as a medium of exchange, not as a store of value. Stablecoins are also an ambivalent beast. If bitcoin's battle cry was to change the financial system, stablecoins may end up cementing it.

The blueprint was laid out by Paul Ryan, an influential Republican who served as speaker of the House of Representatives from 2015 to 2019. Put simply, the US is in a severe debt crisis and the only cures are massive spending cuts (not happening), a catastrophic default (not happening), or finding ways to increase global demand for US dollars to take on more debt (happening).

In a June article in the Wall Street Journal, Ryan argues that stablecoins, which are backed 1:1 by US dollars, are among the biggest buyers of US government debt. It doesn't take a rocket scientist to understand that the US will be very keen to ensure that stablecoin companies are fully regulated and required to buy US government debt when they issue stablecoins. This would allow the US to ignore its debt crisis (at least for a while) and continue to overspend.

It's a telling sign that the largest acquisition in the crypto industry involved a stablecoin company. In October, payment processor Stripe acquired stablecoin platform Bridge for US$1.1 billion.

4. Will the adoption curve look different with Harris in the White House?

I don't think so.

With Harris in the White House, the pace of adoption may be different, but not the direction.

That's because bitcoin and stablecoin adoption serve American interests. Both mitigate the US debt crisis. Bitcoin as a reserve asset will allow Washington to offset some of its debt, while stablecoins backed by the US dollar will allow the US to maintain the dollar's global dominance.

The Republicans are currently more vocal about this, but the Democrats will come around too.

Again, I hope you've enjoyed the Crypto Down Under newsletter. As we bitcoiners say, stay humble and stack sats. Have a great weekend everyone!

Want to store your bitcoin yourself in a cold wallet? Use the link below to purchase a Ledger Nano S Plus wallet.

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