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As the global crypto industry has grown from zero to a USD2.7 trillion market cap in just 15 years, it was only a matter of time before it clashed with traditional finance on Wall Street and America's regulators in Washington.

With the launch of Bitcoin and Ethereum ETFs, we saw the first peace treaties between crypto and Wall Street.

But Washington is still figuring out its relationship with crypto.

However, the last few weeks have marked a significant shift.

This shift has been driven by Republican Donald Trump, who is running for president this November.

Trump just got orange-pilled. For those who don't know, to orange-pill is a crypto term that means to convince someone about Bitcoin.

Just to be clear, this newsletter is not an endorsement of Donald Trump or the Republican Party. I'm trying to stick to the facts and analyze the interplay between crypto and politics.

1. Why Donald Trump is embracing crypto

As mentioned in last week's newsletter, Donald Trump spoke at an industry event in mid-May and said that if you like crypto, you better vote for him.

While his first foray into crypto was wishy-washy, Trump followed up with a number of concrete initiatives over the past few days.

1. He began accepting crypto donations for his political campaign.

2. He said he would defend the right to self-custody crypto assets.

3. He announced that there won't be a central bank digital currency (CBDC) on his watch. Among crypto advocates, CBDCs are often criticized as government surveillance tools.

4. He said he would free Ross Ulbricht, the founder of the darknet marketplace Silk Road, who was sentenced in 2015 to life in prison without the possibility of parole. Transactions on Silk Road were conducted in Bitcoin to protect users' identities.

5. He even said he would consider pardoning WikiLeaks founder Julian Assange, who is currently in prison in the United Kingdom. WikiLeaks turned to Bitcoin donations after its bank accounts were frozen and credit card companies and PayPal refused to process its transactions in 2010.

2. What's behind Trump's embrace of the industry?

Unsurprisingly, Donald Trump is a crypto investor, and a crypto wallet linked to him hit USD10 million in value in May.

But that's not the driving force behind Trump's embrace of the industry.

Trump's team has analyzed that crypto is an election issue because:

1. Americans care. One in five registered American voters say they have bought crypto, according to a survey by crypto investment firm Paradigm.

2. The crypto industry is a growth engine. If the global crypto industry were a company, with a market cap of USD2.7 trillion, it would be the fourth largest company in the world after Microsoft, Apple, and Nvidia.

In addition, the Democrats have failed to develop a constructive position on crypto.

This failure is epitomized by the Securities and Exchange Commission's (SEC) opposition to the industry, chaired by Democrat Gary Gensler, who only greenlit Bitcoin ETFs after losing a court case, and only approved Ethereum ETFs after political sentiment changed.

Therefore, positioning himself as pro-crypto came without any downside risk for Donald Trump. The Democrats allowed him to score a victory without having to spend any political capital.

Now, Democrats are scrambling to reposition themselves as more crypto-friendly, as evidenced by the shift in voting patterns in the House of Representatives.

At the end of May, the House passed landmark crypto legislation with the support of 71 Democrats. The legislation was hailed as a "historic crypto bill" because it was the first time Democrats had voted for (and not against) a crypto bill. The Biden campaign has also increased its outreach to the crypto industry, seeking guidance on crypto policy.

The Democrats' calculus is simple: If they continue to demonize crypto, they risk losing votes to Trump. Not being more crypto-friendly comes with significant downside risk.

3. What does this mean for the US presidential election on November 5?

The US presidential election in November will be the world's first crypto election.

Yes, issues like jobs, the economy, and migration will dominate the election.

However, it will be the first election in which crypto has played a significant role. And from what we can tell right now, whatever the outcome, it will be positive for the industry.

• If Donald Trump is elected and follows through on his promises, the election will be a major catalyst for the industry. Since the SEC chairman is appointed by the US president, Gary Gensler would lose his job and be replaced by someone more pro-crypto.

• If the Democratic candidate, Joe Biden, is elected, he will have to position himself much more pro-crypto than in the past in order not to lose votes to Trump. In this scenario, the election probably won't be a major catalyst, but still a net positive for the industry.

• Since the US is seen as a global leader, Washington's approach to crypto would set a precedent for many other countries around the world. A pro-crypto stance will have a ripple effect in other jurisdictions.

I will close with an interesting fact and a reminder that things are never black and white.

Based on Trump's embrace of the crypto industry, you would expect that everyone in crypto would be pro-Trump.

But that's not the case.

One of the most prominent examples is Anthony Scaramucci.

He's a staunch crypto advocate who served as White House Director of Communications under President Trump in 2017.

But Scaramucci quit his job after just 10 days, and today he's rallying support against another Trump presidency.

He calls Trump a "systemic threat to the country."

Enjoy the weekend, everyone!

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