With the end of the elections, Trump’s return to power, and the Republican Party’s control of all three branches, 2024 is already a certainty. This cycle marks the first time in U.S. history that both the President and Vice President support cryptocurrency, along with a ruling party that is relatively more friendly toward crypto. So, will the cryptocurrency market experience a smooth ride from 2025 to 2026? Does this mean the historical cycles we often talk about no longer exist? As #Bitcoin and the cryptocurrency industry move forward toward the stars, will it be smooth sailing? We will analyze the following perspectives:

1.Political Perspective

Trump’s election indeed provided policy expectations for the cryptocurrency industry, but policy implementation will still take time, especially when the priority is lower. The market sentiment may first experience a cooling phase.

The reason politics is placed at the forefront is that the cryptocurrency industry has strong expectations from Trump’s election. It can be said that the first eight months of 2024 were marked by the prosperity brought by spot ETFs, while the last four months relied on Trump. Trump’s promises at the 2024 BTC Consensus Conference outlined several key directions for cryptocurrency. Let’s see if Trump, with the power of controlling all three branches, can fulfill those promises. If he does, what kind of benefits would this bring to the cryptocurrency industry? Could these benefits push the industry forward, potentially driving the rise of #BTC and #ETH?

PS: The reason BTC and ETH are used as representatives is that both passed the spot ETF approval and are currently the largest assets receiving capital injection from mainstream institutions in the U.S.

Promises that have been fulfilled:

Although Trump did not directly fire SEC Chairman Gary Gensler, Gensler’s voluntary resignation is seen in the industry as a signal that cryptocurrency regulation will shift from strict to more lenient. Gensler’s opposition to BTC and ETH spot ETFs, along with restrictions on staking on exchanges and the issuance of the Wilson notice for DEXs, were viewed as obstacles to the development of the cryptocurrency industry.

While it’s already clear who the new SEC Chairman will be, it’s worth revisiting the previous nominees.

Paul Atkins: Former SEC Commissioner and a member of Trump’s 2016 transition team, he was considered one of the potential successors. Atkins co-hosted the Token Alliance initiative with former CFTC Commissioner Jim Newsome. This alliance brought together over 400 participants globally, including blockchain and token experts, technicians, economists, former regulatory officials, and practitioners from more than 20 law firms, aiming to promote responsible development of tokenized networks and applications. As someone very familiar with the cryptocurrency industry, Atkins was nominated by Trump on December 5th as the new SEC Chairman and accepted the position.

Other nominees included:

Brian Brooks: Former Acting Comptroller of the Currency, who worked at Coinbase and BitFury Group, and criticized the Biden administration’s stringent cryptocurrency regulations.

Richard Farley: Partner at Kramer Levin Naftalis & Frankel law firm, who represented many large financial institutions and was considered a potential candidate.

Additionally, Dan Gallagher, the current Chief Legal Officer of Robinhood, who was previously a top contender, has announced he is not interested in the SEC Chairman position. All of these candidates have strong experience in the cryptocurrency industry, are very familiar with exchanges, and advocate for more lenient regulation. The introduction of any new SEC Chairman, under the current political direction, would likely be more favorable to cryptocurrency.

When Gary Gensler took office, he was hailed as the most cryptocurrency-savvy SEC Chairman in history. During his tenure, he became the first to approve #Bitcoin and #Ethereum futures and spot ETFs, particularly the futures ETFs, which opened the door for cryptocurrency to enter Wall Street. The second peak in the latter half of 2021 was closely tied to the approval of the futures ETF.

However, Gensler took a more aggressive stance starting in 2023, mainly due to the collapse of FTX. Initially, Gensler and FTX CEO Sam Bankman-Fried were seen together at various public events and participated in discussions supporting the cryptocurrency industry. But after the sudden collapse of FTX in 2022, it led to a shift in the Democratic Party’s political stance, pushing for stricter cryptocurrency regulations. Despite this, Gensler’s contributions to the cryptocurrency industry were significant.

One of Gensler’s most contentious actions was his stance that most cryptocurrencies (except BTC) should be treated as securities and thus fall under SEC jurisdiction. He emphasized compliance with U.S. securities laws and required token issuers to register as securities issuers.

So, will the new SEC Chairman fundamentally change the current situation in the cryptocurrency industry?

I don’t think so. From 2022 to 2024, the SEC imposed fines totaling $5 billion on the cryptocurrency industry, with nearly $1.5 billion each year in 2022 and 2023, and a sharp increase to $4.7 billion in 2024. Of this, $4.47 billion came from actions against Terraform Labs (LUNA) and its former CEO, Do Kwon, marking the SEC’s largest single enforcement action to date. In comparison, the SEC’s total fines and penalties from 2022 to 2024 across all sectors amounted to $13.58 billion, meaning that nearly 37% of these fines were from the cryptocurrency industry.

How is this money being used? Apart from a portion being returned to victims, some funds are used for daily operations. If fines cannot be reasonably distributed to victims, or if the scope of illegal activities is too broad, the fines are typically directed to the U.S. Treasury’s General Fund, supporting various federal budget expenditures. While the exact amount of fines submitted to the Treasury hasn’t been disclosed, it’s likely to be substantial.

If we view the SEC as a “revenue-generating” agency for the U.S., and considering that the cryptocurrency industry itself is highly diverse and risky, strict regulation of cryptocurrency may not necessarily harm U.S. interests. This is also why I highlighted BTC and ETH earlier—because, after the approval of spot ETFs, at least these two cryptocurrencies have become compliance models. However, the benefits for the cryptocurrency industry are not necessarily unconditional or all-encompassing. They still require basic regulatory recognition.

For example, in the case of spot ETF applications, the Howey Test remains essential. Even with a new SEC Chairman who is more supportive of cryptocurrency, basic principles will still be followed. So, if some believe that a change in leadership will lead to unlimited support for cryptocurrency, they might be mistaken. Besides compliance, factors like consensus, decentralization, and capital support are crucial. Particularly the latter. For instance, after the election, spot ETF applications for #Solana and #XRP were submitted. My personal view is that the main point is the support from the big three—BlackRock, Fidelity, and Bitwise. If these top three institutions are not involved in the applications, especially BlackRock, it suggests that the approval chances may be low, and even if approved, the market impact may be limited. Therefore, if these assets are not the primary focus of these institutions, there’s no need to focus too much on them for now. Having some exposure is fine, but it’s a situation to watch after January 20th.

In addition to spot ETFs, a more critical issue is the ongoing lawsuits between the SEC and the cryptocurrency industry, including the Wilson notice. The most famous case is the lawsuit with Ripple (XRP). Interestingly, Ripple sponsored the Democratic Party in this election, rather than the more crypto-friendly Republican Party. This might be an effort to soften its position in the ongoing SEC lawsuit. However, with Trump’s return to power and Gensler’s resignation, the market has interpreted this as a potential end to Ripple’s appeal against the SEC.

Incorporating insights from Wu Xiong @qinbafrank, he believes Ripple is actually more supportive of the Republican Party, but this support is somewhat concealed. This is because Ripple is a member of FairShake, a super PAC supported by the cryptocurrency industry, which includes Coinbase, Ripple, and a16z. FairShake primarily donates to pro-crypto candidates in U.S. congressional elections, although there is no public evidence that FairShake has supported Trump or Harris in the presidential election.

However, Chris Larsen, Ripple’s co-founder and executive chairman, donated around $10 million worth of XRP to Vice President Kamala Harris’s campaign during the 2024 election. Therefore, my personal view is that Ripple may have favored Harris more during the election.

Regarding Ripple’s case, the outcome is different from what many might expect.

In the initial ruling on July 13, 2023, U.S. District Judge Analisa Torres ruled that Ripple’s programmatic sale of XRP through digital asset exchanges did not constitute a securities offering because it did not meet the third prong of the Howey Test—the reasonable expectation of profits derived from the efforts of others. However, the court ruled that Ripple’s sales to institutional investors did qualify as unregistered securities offerings, violating Section 5 of the Securities Act.

In simpler terms, Ripple did violate the law, but only partially, meaning it didn’t win the case. Ripple will still need to pay a fine, but the amount will be lower.

In addition, in July 2024, the SEC appealed the ruling, challenging the court’s conclusion that Ripple’s sale of XRP on digital asset platforms didn’t qualify as an unregistered securities offering, and that the sales by Garlinghouse and Larsen did not violate securities law. On November 1, 2024, the Second Circuit Court of Appeals ordered the SEC to submit its appeal brief by January 15, 2025.

As we can see, even though the SEC Chairman has changed, the SEC’s approach to cryptocurrency is unlikely to be entirely relaxed. Given the fines of $2 billion or $150 million, both the SEC Chairman and Trump are likely to choose what benefits the “nation.” Gary Gensler’s resignation on January 20 means that he will likely prepare all the prosecution materials beforehand. Using Ripple’s case as an example, it shows that the SEC’s fines in the cryptocurrency industry may continue, but the conditions might be somewhat relaxed, with greater tolerance for financial innovation.

This leads to the second point of discussion—lawsuits against exchanges. There are two notable lawsuits: one against #Coinbase and the other against #Binance. These cases are quite different in nature, but one particular aspect could significantly impact the future of the cryptocurrency industry.

This is the SEC’s lawsuit against exchanges for staking (earning interest on holdings). Kraken chose to settle by paying a fine, but the case against Coinbase is still ongoing. This lawsuit might have important implications for Ethereum (ETH) spot ETF staking. If Coinbase wins, it could prove that staking with spot ETFs is viable, possibly even through custodial services like Coinbase. Regarding this non-core issue, the new SEC Chairman might choose to drop or settle the case.

Thus, despite the change in the SEC Chairman, it doesn’t mean that the cryptocurrency industry will be completely relaxed. In fact, cryptocurrency remains one of the SEC’s revenue sources.

Unfulfilled promises:

The most crucial point is to ensure that the U.S. government will not sell any more BTC and will instead use the seized BTC as a strategic reserve. In fact, Trump has never stated that he intends to buy new BTC as a strategic reserve. In July 2024, Wyoming Senator Cynthia Lummis introduced the Bitcoin Strategic Reserve Act of 2024, which proposes to purchase no more than 200,000 BTC annually for five years, totaling 1 million BTC. This would create a decentralized BTC security storage network managed by the U.S. Treasury, ensuring the security and flexibility of the reserves. The funding for these purchases would come from the Federal Reserve and the Treasury’s existing funds, including reassessing the value of the Federal Reserve’s gold certificates to reflect market value, using the difference to purchase BTC.

In essence, this would involve selling gold from the Federal Reserve to buy BTC—$20 billion or more annually, even based on current prices. Given that the U.S. government’s total expenditure in 2024 is $6.75 trillion, with a debt of $36.05 trillion and a deficit of $1.833 trillion, it seems unlikely. Of course, if Trump only intends to not sell and use the existing seized assets as a strategic reserve, this is more feasible. After all, Trump effectively controls Congress and has a chance to pass the proposal, though it is not guaranteed.

Next, Trump wants to establish a BTC and Cryptocurrency Advisory Council to formulate policies favorable to cryptocurrency. This should be relatively easy to implement, but the council will likely focus more on compliant cryptocurrencies like BTC and ETH. For non-compliant tokens, especially altcoins, the council might enforce stricter regulations, which may not be good for the unregulated tokens.

Another proposal is to make U.S. electricity prices the lowest globally to support BTC mining. While Trump controls Congress, implementing this will be more difficult due to the highly market-driven nature of the U.S. electricity market. Electricity prices are influenced by supply-demand relationships, fuel costs, and infrastructure investments, and direct federal intervention could face legal and market challenges. Moreover, BTC mining consumes a vast amount of energy, which could increase carbon emissions and contradict global environmental policies. Large-scale mining could negatively impact local energy supplies and environments, leading to public opposition. For instance, in Texas, a major mining hub, residents have strongly opposed mining activities due to noise, health concerns, and environmental worries. The residents of Hood County, for example, filed a lawsuit against a mining facility in Granbury, citing “intolerable” noise and vibrations causing health issues, seeking a permanent injunction to stop the noise.

Additionally, mining consumes large amounts of energy, which leads to higher electricity prices, and these costs are borne by all Americans. The mining profits go to the mining facilities, but the increased electricity costs are spread across the population, making it difficult to achieve the goal of the lowest electricity prices. However, encouraging mining itself is not a problem.

Trump also opposes CBDCs and supports stablecoins, another proposal with little resistance since stablecoins are extensions of the U.S. dollar’s global dominance. In 2023, the Republican Party began researching a stablecoin draft law.

In conclusion, Trump’s core promise is to make the U.S. a superpower in BTC, and this is highly feasible. Extending from this, the U.S. will likely have more relaxed policies and regulations for compliant cryptocurrencies like Ethereum. However, it is clear that Trump’s support is not for the entire cryptocurrency market, but rather limited to BTC and a few compliant or potentially compliant tokens. The current market optimism towards Trump and the Republican Party is overestimated, conflating compliant cryptocurrencies with the entire crypto market. In reality, the U.S. may develop into a foundation for #BTCFi ( #Bitcoin-based decentralized finance) and RWA-backed on-chain asset issuance, with #Ethereum being the primary beneficiary.

After discussing Trump’s promises, many people might ask, “What does this have to do with the market? A lot of talk with no mention of price movements.” Don’t worry, all of this is groundwork. Without this context, you wouldn’t believe the conclusion I’m about to present. From Trump’s promises, we can see that both Trump and the forces behind him are more focused on compliant cryptocurrencies. In the past, the conditions for a “altcoin season” to kick off were when there was enough overflow capital in mainstream coins, and then it would flow into altcoins. This cycle is clearly one where BTC is surging on its own, with large amounts of capital concentrated in BTC, a situation that even ETH lags behind. This may just be the beginning, and as compliance deepens, even if there is more leniency towards the industry, it might only apply to innovation and compliant projects. So, in terms of price movements, there should be two possible scenarios.

Is someone going to jump out and say, “Isn’t this just stating the obvious? After all, it’s either up or down. What’s the difference between saying both?” Hold on. Yes, it’s true that it’s either up or down, but without establishing the premise for price movements, it would be meaningless. If the U.S. economy can achieve a soft landing or avoid a recession during this cycle, BTC and ETH may follow a long-term, steady uptrend similar to gold’s 10-year bull run. On the other hand, if there’s an economic downturn, then it’s clear that the entire cryptocurrency market will likely experience a pullback. However, BTC, ETH, and a few other tokens may see smaller pullbacks, while others could face much larger declines. Even in the first scenario, where BTC and ETH experience a steady uptrend, altcoins will still be limited by liquidity, especially since we are still in a liquidity tightening cycle.

From this perspective, after the first quarter of 2025, the first challenge may arise, and the difficulty of each subsequent challenge will increase. Why is that? Because in relation to the overall U.S. plan, cryptocurrency is a low priority. Based on the publicly disclosed details of Trump’s first 120 days in office, there is no mention of any cryptocurrency-related matters.
His main focus is on:

A. Immigration policy: Preparing to deport 11 million illegal immigrants and rebuilding the border wall between the U.S. and Mexico.

B. Restructuring government agencies: This is something he is working on with Musk, and there will be significant layoffs in government institutions.

C. Foreign policy: Emphasizing America First, with a focus on ending the Russia-Ukraine war as soon as possible.

D. Expanding energy development and fossil resource extraction: This has some relevance to the crypto industry as it could slightly lower mining costs due to increased raw material availability, though it also involves removing green energy subsidies.

E. Tax reform and social policy adjustments: Here, there might, just might, be some involvement with cryptocurrency industry tax matters, but there are no clear proposals yet.

As we can see, there are no direct cryptocurrency-related priorities in Trump’s transition plan. Therefore, the market’s FOMO (Fear of Missing Out) sentiment is likely to follow the same pattern as during the election cycle: rising to a peak, gradually stabilizing, and eventually transitioning to a more cautious stance. The next step will be for Trump to focus on adjusting the cryptocurrency industry once he has completed his immediate priorities. Of course, many people might ask: Can’t these things be done simultaneously? As we discussed earlier, Trump’s promises are not solely his to decide; they require support from Congress. While Congress may back the President, it’s not unconditional and involves internal political maneuvering. So, even if it could proceed simultaneously, the cryptocurrency industry still has a relatively low priority, which will impact market sentiment.

So, are there any bills that don’t need the President’s lead but could still be beneficial to the cryptocurrency industry?

It turns out, yes. This is the next topic we’ll discuss.

2. Bill Perspective

The changes in the bills reflect the United States’ support for the compliant development of cryptocurrency, particularly focusing on mainstream assets like BTC and ETH. The improvement of regulations will not only attract more institutional investments but also drive the deep integration of virtual assets with traditional assets.

The bills themselves are not based on Trump’s promises, but were anticipated before the election. These bills, which can benefit the cryptocurrency industry, were delayed for various reasons. After the election, some of these bills may have a chance to be prioritized, which is not directly related to the president but still requires approval from Congress and time to process.

A.SAB121

This bill is something that many people have likely heard of. The reason it is placed first is because of its high potential impact. If this bill passes, it will effectively bridge the gap between Web2 and Web3 funding. In May 2024, both the House of Representatives and the Senate had already passed a resolution to overturn SAB121, but it was vetoed by then-President Biden using his veto power. At the time, Biden stated that the bill could pass, but not in such a manner—meaning it should not be forced through. So, what exactly is SAB121, a bill that was unanimously passed by Congress but strongly opposed by Biden?

The main content is: Institutions that custodian crypto assets need to recognize a liability and an equivalent asset on their balance sheet, both of which are measured based on the fair value of the custodied crypto assets.

In simpler terms, if a bank provides custody services for cryptocurrency, for example, if it custodies #Bitcoin, it needs to prepare an amount of funds equal to the current value of the Bitcoin being held. To put it another way, if someone deposits a Bitcoin worth $100,000 in a US bank, the bank must set aside an additional $100,000 as a “margin” for the custody. The advantage of this is that if anything goes wrong with the custodied Bitcoin, the bank has enough funds to compensate. However, the downside is that the bank would need to set aside a large margin, and the custody fees wouldn’t be very high, so it becomes a thankless task. As a result, no bank is willing to offer crypto custody services, which is why only crypto-centric service providers like Coinbase are currently doing this.

Thus, the benefits of canceling SAB121 are clear. Banks can directly offer cryptocurrency custody services. Bank custody services are just the first step. Looking at the example of gold, after US banks started custodizing gold in 1974, they quickly began offering collateralized lending services based on the custodied gold. Of course, cryptocurrencies may take a little longer, but once banks can offer custody services, the Bitcoin held in banks would essentially have a guaranteed Bitcoin certificate, with the bank taking on most of the secondary network work for Bitcoin, making it more secure. Many of you should know that the past year has been one of the best for Bitcoin and the Bitcoin ecosystem.

Since last year, with the emergence of inscriptions, the BTC second-layer network derived from the inscriptions market, and the Bitcoin spot ETF, the application scenarios for Bitcoin have increasingly gained recognition on Wall Street. However, until now, even the Bitcoin spot ETF is just one of the mediums to purchase Bitcoin. As for inscriptions and the Bitcoin second-layer network, their main limitation is still compliance. Currently, Bitcoin is somewhat compliant, but even so, the Bitcoin spot ETF like BlackRock’s $IBIT cannot be used as assets for secondary financing (including collateralized lending) in banks. Inscriptions ended their development at the beginning of the year due to the dispute between large and small blocks and between the East and West. The second-layer network, while having a promising market, still has limited interaction with Bitcoin, as all assets on the chain are just representations of Bitcoin, not native Bitcoin, which raises concerns about security and regulation. Moreover, the second-layer network is mostly used for collateralized lending, with funds mainly operating on the chain. There is a ceiling to this model.

However, when banks enter the game, the rules change. This is the current foundation for compliant #BTCFi , where all assets are custodized in trusted banks and brokers. Banks issue certificates for the custodied Bitcoin, and these certificates can be placed on-chain, representing native Bitcoin. These Bitcoin assets are not limited to Web3 applications but can also be used for fiat withdrawals via collateralized lending in banks or for on-chain applications based on RWA. The purchase of Bitcoin could then be transformed into the purchase of Bitcoin certificates. Furthermore, I have designed a liquidity pool for #BTCFi that provides liquidity through Bitcoin, $MSTR, and $IBIT to solve the cryptocurrency industry’s pressing needs, including KYC for funds, cryptocurrency asset inheritance, liquidity, and risk hedging.

Therefore, we can see that once SAB121 is passed, it will open the door for banks to custodian cryptocurrency. Behind this custody will be collateralized lending based on cryptocurrencies by banks. Of course, not all cryptocurrency assets can be custodized by banks—only compliant cryptocurrencies can be. This is why the bill is placed after policy discussions. The passage of SAB121 can be seen as opening the window for BTC to integrate with RWA, BTCFi, and RWAFi, effectively bundling virtual assets with real-world assets.

Currently, it is expected that SAB121 will be reintroduced in the second or third quarter of 2025.

B.FIT21

In addition to SAB121, there is also the FIT21 bill. If SAB121 targets compliance cryptocurrencies centered around BTC, then FIT21 provides the “ammunition” for SAB121. The “Financial Innovation and Technology for the 21st Century Act” (FIT21) is a bill proposed by the U.S. Congress aimed at clarifying the legal status of digital assets under U.S. law and establishing a clear regulatory framework for them. The bill clarifies the roles of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the regulation of digital assets. Specifically, if a digital asset operates on a functional and decentralized blockchain, the CFTC will regulate it as a commodity; if the blockchain is functional but not decentralized, the SEC will regulate it as a security.

In simpler terms, FIT21 changes the previous regulatory framework. Previously, cryptocurrencies were primarily regulated by the SEC, and getting the SEC to acknowledge that a token was not a security was extremely difficult. As of now, the SEC only recognizes six tokens as non-securities: BTC, ETH, BCH, LTC, DOT, and STX. This means that, with the exception of these six tokens, most other tokens are considered securities under the SEC’s jurisdiction. However, if FIT21 is passed, as long as certain conditions are met, cryptocurrencies will fall under the jurisdiction of the more crypto-friendly CFTC. Only those that do not meet the criteria will be governed by the SEC.

The conditions for functionality are:

I. A blockchain asset must have a clear use and play an actual role in its ecosystem, such as being used for payments, executing smart contracts, or storing data, becoming part of the blockchain network. For example, ETH on Ethereum is used to pay network transaction fees (Gas), which demonstrates its functionality. If a digital asset is issued solely to raise funds but does not play any practical role within the blockchain network, it may not meet the functional criteria.

II. Decentralization refers to the distribution of control over the blockchain network across multiple nodes, rather than being concentrated in one entity or a small group of controllers. If decisions in the network are made through consensus mechanisms (e.g., PoW or PoS) by numerous independent nodes, this indicates decentralization. Conversely, if key decisions are controlled by a single company or a small group, it may not be decentralized enough.

III. Furthermore, it is important that no one has unilateral control over the blockchain or its use, and no issuer or related party controls 20% or more of the digital assets or voting rights associated with them.

Once these three conditions are met, the digital asset will be classified as a “commodity” and fall under the CFTC’s jurisdiction. If these conditions are not met, it will be classified as a “security” and fall under the SEC’s jurisdiction. Therefore, the passage of FIT21 would help many blockchain projects that meet the requirements avoid the constraints of securities regulation. Of course, this will only apply to a small number of projects, and many others will still fall under securities regulation. However, FIT21 at least provides clear criteria, allowing project teams to plan effectively from the early stages of their projects.

Currently, it is expected that FIT21 may be passed in the second quarter of 2025.

Combining SAB121 and FIT21, we can see that if both bills are passed, they will create a favorable pathway for many cryptocurrencies to become compliant. These two bills are seen as key solutions that can impact the cryptocurrency market. More importantly, both bills already have a solid foundation for passage. SAB121 has already been fully approved by Congress, so if reintroduced, it will likely pass quickly. FIT21 was already passed by the U.S. House of Representatives on May 22, 2024, with 279 votes in favor and 136 against. It is now awaiting a vote in the Senate. These two bills demonstrate bipartisan consensus on digital asset regulation. With Trump’s presidency, Vice President Vance, and a unified Congress, the probability of these two bills passing is very high.

C.FASB

Although the FASB (Financial Accounting Standards Board) is not considered a bill, it is still crucial for the cryptocurrency industry, which is why it is mentioned here. Starting December 15, 2024, new financial rules will be officially implemented, allowing cryptocurrencies to be reported at fair value in financial statements. The advantage of this is that publicly traded companies will be able to list cryptocurrencies as valid assets in their financial reports. As a result, more and more publicly listed companies in the U.S. are beginning to allocate cryptocurrencies, particularly BTC, as investment assets, with the primary example being $MSTR. The adoption of fair value accounting will also likely drive more listed companies to incorporate cryptocurrencies to enhance their financial statements.

Of course, in addition to these three, there are other proposals, but their influence and importance are not comparable.

At this point, from the perspectives of politics and regulation, we can see that when Trump takes office, under a unified government, there is already a positive outlook for the cryptocurrency industry without Trump having to actively push for it. However, this outlook still hinges on maintaining compliance, and it can be more bluntly stated that only cryptocurrencies marked as “commodities” will have longer upward cycles and more capital inflows. Once cryptocurrencies meet the “commodity” criteria, they can be listed on the CME futures market through the CFTC, laying the foundation for both futures and spot ETFs.

Some might be wondering whether this means that the cryptocurrency industry is likely to enter a long bull phase, especially since politically and regulatory-wise, there is nothing adverse to cryptocurrencies. However, as I mentioned earlier, there are still expectations for both ups and downs. This brings us to the third factor in our assessment.

3. Macroscopic Perspective

In a high interest rate environment, cryptocurrencies may continue the slow upward trend of major assets (BTC, ETH), while altcoins may face suppression due to a lack of funding.

Regarding the macroeconomic situation, many of you should be aware that since the end of 2021, it has been indicated that the overall risk market might face significant liquidity challenges due to the Federal Reserve’s interest rate hikes. Some may argue that the interest rate hikes don’t matter since cryptocurrencies and U.S. stocks continued to rise, but this is both true and not true. It is true because in 2023, the entire risk market, including U.S. stocks, emerged from the shadow of interest rate hikes. Even though liquidity remained tight, both U.S. stocks and the cryptocurrency industry reached new highs, which might seem to suggest the impact of the rate hikes was minimal. However, a closer analysis reveals that the rise in U.S. stocks was largely driven by the surge in tech stocks and the “seven sisters” companies. The key reason for this surge was the transformation of tech stocks from risk assets into safe-haven assets due to the impact of AI. Cryptocurrencies also benefitted from #Bitcoin reaching the $100,000 mark after the approval of a spot ETF. However, I can responsibly say that you are underestimating the macroeconomic cycle.

If we break down the macroeconomic situation into four stages, it becomes easier to understand. First, the interest rate hike phase, followed by the rate-hike pause phase, then the rate-cutting phase, and finally, the low-interest-rate phase. When these stages are placed within the historical context, it becomes evident that in the early stages of interest rate hikes, the sudden liquidity tightening forces risk market investors to exit, leading to the first wave of decline. However, as the rate hikes peak, such as when the Fed ended rapid hikes in late 2022, the risk market begins to anticipate liquidity recovery and enters the rate-hike pause phase. This is when the worst phase is perceived as over, and market sentiment starts to pick up, triggering the first wave of bottom-fishing. In most cases, the rate-hike pause phase is when the risk market begins to recover, but high interest rates can also trigger negative market sentiment, as evidenced by the collapse of Silicon Valley Bank in 2022 due to high interest rates.

This is why the Fed’s rate hikes often coincide with economic recessions, though the triggering event often occurs during the rate-cutting phase. It’s not that a recession happens because of rate cuts, but when a recession occurs, the Fed accelerates rate cuts to mitigate the economic downturn. However, this doesn’t mean that rate cuts always lead to a recession. In 2024, macro analysts have been debating whether the U.S. economy will enter a recession. By the third quarter, the Fed largely concluded that the economy is stable, with normal supply and demand levels in the labor market, making a soft landing more likely. However, no one knows for sure. Looking ahead to 2024, the election may help stabilize things. Based on past trends, the three months following the election are typically a period of high risk market sentiment, reducing the likelihood of a black swan event in the first quarter of 2025.

If rate cuts do not trigger a recession, they are actually favorable for the economy. Lower interest rates will increase investor risk appetite, encouraging them to invest in assets with strong fundamentals but lacking sufficient capital or rotation, such as Nike in the U.S. stock market. In the cryptocurrency market, assets with strong growth potential and indispensable applications may be favored as risk appetite increases.

However, it’s important to note that according to the Fed’s projections, interest rate cuts in 2025 could be between 50 to 100 basis points, or two to four cuts. Therefore, even by the end of 2025, the U.S. may remain in a high-interest rate environment, potentially above 4%. In this case, the likelihood of a recession increases. Moreover, based on recent statements by Fed officials like Jerome Powell, after a 25 basis point rate cut in December 2024, the Fed is likely to pause further cuts for some time. This could challenge market sentiment, as we discussed earlier. By the second quarter of 2025, market liquidity will still face challenges, and the election-driven FOMO (fear of missing out) will gradually dissipate. As we mentioned earlier, Trump’s priorities are not focused on the cryptocurrency industry. Once the first quarter ends, investors may realize this, and combined with the Fed’s rate-hike pause, this could trigger negative reactions in the market.

This is not over yet. After Trump takes office, he will carry out large-scale reductions in the employment provided by the government. One of the economic data that the Fed is most concerned about is the unemployment rate, so starting from the second quarter, it is very likely that the unemployment rate will gradually increase. rising, market expectations for an economic recession may continue It continues to get worse, and there is still a Japanese interest rate hike waiting here. According to the current information, the probability of Japan raising interest rates in December is very high, and it is not even ruled out that it will continue to raise interest rates in 2025, and the Japanese yen is a risky market. There is almost no one of the largest loan assets. Although the Japanese yen’s interest rate increases from now on It may not have a big impact. Even after the December interest rate hike, the interest rate is still 0.5%. However, if interest rates continue to rise in 2025 and rise to more than 1%, it may have a profound impact on the market. , of course Japan’s interest rate hike has relatively little impact on cryptocurrencies, more The focus is still on U.S. stocks and U.S. bonds, but the overall trend of cryptocurrency must follow U.S. stocks, especially since we have used a long article to introduce it, but the cryptocurrencies that will be good after Trump takes office must be premised on compliance, so When problems arise in the general environment, it is estimated that altcoins will have a hard time keeping up. #Bitcoin as well as #Ethereum pace, and even if there is a crisis, both compliant cryptocurrencies may see a downturn.

By now, the impact on the cryptocurrency industry may be basically all here. Some friends may ask,What about war?, if a large-scale war occurs, will it have a great impact on the cryptocurrency industry? For example, the incident in South Korea caused the price of #BTC to plummet. This is not a real use of force. If there is a geopolitical conflict Will deepening have a reaction to cryptocurrencies, and will it be positive or negative?

First of all, my personal point of view is to see how intense the war is and whether it drags the United States into the water. I know what some friends are thinking. As long as the war does not drag the United States into the water, there is a high probability that encryption will not be affected. Currency markets have long-term effects, and this is also related to #BTC Is it considered a risk asset or a safe-haven asset? If we simply look at war, BTC is a safe-haven asset to a greater extent. As can be seen from the Russia-Ukraine conflict, the beginning of the war is the beginning of financial control. Even if there is It is also difficult to convert a large amount of real estate into legal currency in a short period of time. Even the legal currency you exchange may not be what you want to use. Even if you hold a large amount of bonds, gold and cash, it may not be able to save the situation. But cryptocurrencies are completely different, especially BTC, which is used in almost most countries around the world. can be easily exchanged for local legal currency. If we follow this,The hedging of BTC is not the risk of asset preservation, but the risk of acceptance.

And even if there is a large-scale war, there will inevitably be precursors. At least for now, there is no expectation that the United States will be dragged into the war before the third quarter. Therefore, the impact of the war can be left behind for the time being. In addition to the war, there is one more thing to note. Although Trump has obtained the three powers in one, it is not guaranteed for the entire four-year term.The U.S. midterm elections in November 2026 may reshuffle the situation again, so the time actually given to Trump should be two years, or even less. In the past two years, Trump should be more concerned about the traditional economic and political levels, and cryptocurrency may be slightly delayed. Therefore, our final summary should be the following points.

4. Trend Perspective

The trend perspective shows that the future major growth drivers in the cryptocurrency market will focus on mainstream assets, with macroeconomic and policy changes being the key variables. Investors should focus on compliant projects and mainstream assets while being cautious of short-term risks posed by liquidity and economic recession.

Ending with a trend analysis is very appropriate, as it allows us to glimpse into what might happen from 2024 to 2025, or even 2026.

1. Opportunities in 2024 include Microsoft’s vote on purchasing #Bitcoin on December 11 (Beijing time), and the possibility of MSTR being included in the Nasdaq 100 Index and QQQ (Invesco QQQ Trust ETF). Both events could affect BTC’s price. In the best-case scenario, Microsoft’s vote passes, and MSTR successfully enters the Nasdaq 100. These developments would greatly boost sentiment in the crypto market. However, if neither materializes or Microsoft does not vote to buy BTC, it could severely impact the already declining FOMO sentiment.

A key point here is that the current sentiment has already started declining from the peak FOMO levels. Many might argue, “How can it decline if BTC just broke $100,000?” Looking at the timeline, after the first failed attempt to break $100,000 and the subsequent consolidation near $95,000, sentiment had already weakened. ETF purchase volumes and trading activity on #Binance and #Coinbase also saw noticeable pullbacks. If it weren’t for the December 5 announcement of the new SEC chairman and Jerome Powell’s acknowledgment of #BTC as gold’s competitor, BTC would not have regained the FOMO sentiment needed to surpass $100,000.

After BTC broke $100,000 in early December, prices began to decline as FOMO sentiment subsided. Ahead of the November non-farm payroll data release, geopolitical issues in Korea caused a sharp pullback, with BTC even falling below $90,000. This drop was primarily due to reduced buying interest linked to the waning FOMO sentiment. The news on Friday about David Sacks becoming the trusted crypto czar helped BTC retest $100,000. This shows how external factors can significantly influence market sentiment and BTC prices.

From BTC’s recent price trends, it is clear that when user FOMO sentiment recedes, BTC seeks a new support level, such as $95,000 in this case. External stimuli can push FOMO sentiment again in the short term, leading to capital inflows, but the duration of such sentiment depends on the stimulus’s strength. Once sentiment wanes, BTC inevitably faces a correction. Identifying the bottom is crucial in investment strategies. Examples include $16,000 in 2022, $26,000 in 2023, and $64,000 in 2024, all serving as strong support levels. On-chain support often differs from technical support, as it focuses on BTC’s dense distribution. Large concentration zones act as support levels that, if unbroken, indicate no significant sell-offs, maintaining price stability. Currently, on-chain support is around $95,000.

As discussed earlier in the macroeconomic context, whether the Fed cuts rates as expected in December 2024 is critical. The market strongly anticipates a rate cut in December, or at least a delay until January 2025. However, if the Fed chooses to pause instead of cutting rates in December, it could negatively affect sentiment. The Fed’s December meeting is scheduled for December 19 (Beijing time), less than a week before Christmas in the U.S. While U.S. stock markets close for the holiday, cryptocurrency markets do not. Due to the absence of market makers and low liquidity during Christmas, the market is likely to be dominated by low-liquidity sentiment. In simple terms, small amounts of capital can cause significant price movements, with low liquidity making it easier to pump or dump the market.

The rise or fall in the market is driven by user sentiment. If there is no rate cut in December and liquidity remains low for an extended period, panic may lead to significant sell-offs before Christmas. However, a rate cut doesn’t guarantee a sustained rise during Christmas, but it would stabilize emotions compared to no rate cut. Between Christmas and January 20th, when power transitions occur, the market typically experiences low sentiment and limited liquidity due to the holidays. Without positive catalysts, the market may oscillate sideways or experience a pullback if sentiment is poor. Any negative news could deepen the pullback.

Looking at expectations for the remainder of 2024, politically, there may be no new support but also no hindrances, leaving room for some optimism. Similarly, regulatory developments are unlikely to drag the market down but could maintain a level of expectation. These two factors could fuel FOMO among users, and even slight positive developments in these areas could easily boost sentiment. The third macroeconomic factor impacting the market before 2025 depends on labor market conditions and U.S. economic expectations. If macro sentiment is favorable, labor markets are not tight, and no economic recession is anticipated in the U.S., then 2024 may conclude smoothly. Conversely, if macro sentiment deteriorates, labor markets tighten, and the U.S. experiences a recession, the final weeks of 2024 may be challenging.

1. Regarding 2025, before delving into specifics, I reviewed BlackRock’s outlook for 2025, which includes the following statement:
   “In 2025, geopolitical fragmentation intensifies, coupled with significant spending on AI infrastructure and low-carbon transitions, keeping inflation pressures persistent. Slowing immigration may exacerbate labor force aging challenges, sustaining high wage growth. The Federal Reserve is unlikely to aggressively cut rates, with rates probably staying above 4%. Persistent budget deficits, sticky inflation, and heightened volatility are expected to drive long-term Treasury yields higher as investors demand greater risk compensation.”

From BlackRock’s analysis, a key expectation for 2025 is that inflation pressure will remain high, making it unlikely for the federal rate to drop below 4%. This suggests that anticipated QE or balance sheet expansion might not occur in 2025. Why does this matter? Historically, cryptocurrency bull markets have coincided with monetary easing. For instance, in 2021, during the COVID-19 pandemic, central banks, including the Federal Reserve, directly provided funds to users, while reduced outdoor activities led to increased investments in assets, driving the rise in altcoins. This highlights the importance of liquidity, primarily derived from monetary easing.

Some may question the certainty of BlackRock’s predictions. While not guaranteed, recall that macroeconomic expectations indicate the Federal Reserve may only cut rates 2–4 times in 2025, with rates likely remaining above 4% unless a significant economic downturn forces substantial rate cuts to stimulate recovery. Fundamentally, unless inflation drops sharply in 2025, liquidity release will be challenging. If rate cuts occur due to economic recession, the recession’s damage to the market would outweigh the benefits of rate cuts. Without a recession, mainstream assets like U.S. equities (AI sector) and cryptocurrencies (BTC, ETH) might slowly trend upward. However, if a recession hits, the entire market could face significant retracements.

Given this, we can make the following projections for 2025 and beyond:

1. In Q1, the power transition involving Trump and Republican control over all three branches of government could support risk markets. Although Trump favors traditional economic development, the crypto industry could see strong expectations. A new SEC chairman and cryptocurrency-focused regulators might create opportunities for crypto to thrive. Institutions could propose ETFs, legislative amendments, or new rules for crypto, stimulating user sentiment even without guaranteed approval. Examples include potential applications for Solana and XRP spot ETFs.

In February, the release of Q4 2024 financial reports will serve as a strong positive catalyst, especially for the AI and cryptocurrency sectors. AI’s momentum is clear, with firms like BlackRock identifying it as a core investment for 2025. In the crypto space, the adoption of the new FASB accounting standards allows companies to use fair value measurements in their reports. Combined with significant cryptocurrency gains and robust trading volumes at the end of 2024, these reports are expected to greatly benefit publicly listed cryptocurrency companies, including exchanges and mining operations. As these reports drive stock prices higher, investor sentiment will likely improve as well.

On the downside, the Federal Reserve will hold two FOMC meetings in Q1 2025, on January 29 and March 19. These meetings may introduce risks, as there is an expectation for only 2–4 rate cuts throughout 2025. If four rate cuts occur, one might take place in March. However, if only two or three cuts are made, March might not see a rate cut at all. The January 29 meeting falls during the second week of the power transition, a period when FOMO sentiment might start waning. A decision not to cut rates could accelerate this decline. However, given the early phase of the power transition, any positive developments could reignite FOMO sentiment, making January 29’s risks relatively manageable.

March 19 presents greater risks. By then, two months will have passed since the transition, and user sentiment may have significantly weakened. Historically, market performance tends to be stronger three months before and after an election, but March 19 falls just outside this favorable window. A failure to cut rates in January and March could severely impact user sentiment. Additionally, high interest rates might increase the likelihood of economic recession. Unemployment rates exceeding the Fed’s target of 4.3% could also heighten concerns of a trading recession.

Apart from U.S. rate cuts, Japan’s potential rate hikes in January and March also pose challenges. Although Japan’s rate increases are expected to be modest (likely 25 basis points to a total of 0.75%), the timing could impact market sentiment. If Japan raises rates in December 2024, the likelihood of a January hike decreases, but a March hike becomes more probable. Conversely, if no rate hike occurs in December, the chances of a January hike increase, reducing the likelihood of a March hike. While these changes might not directly affect cryptocurrencies, the compounding effect of negative sentiment could disproportionately impact altcoins compared to #BTC and #ETH.

Geopolitical and trade issues in Q1 are unlikely to significantly impact the market. Geopolitical tensions during the power transition are expected to have limited effects on the U.S., and trade developments may contribute to GDP and inflation growth.

In summary, Q1 2025 presents more opportunities than risks. Although risks will grow after March, much of the FOMO sentiment could be absorbed before then.

1. From Q2 to Q4, opportunities will largely depend on support for the cryptocurrency industry from Trump and Congress. Key proposals, such as SAB121 and FIT21, are likely to emerge in Q2. While risks and opportunities will coexist, these developments will primarily benefit compliant cryptocurrencies like BTC and ETH. Altcoins, however, may remain reliant on liquidity. Provided there are no economic recessions or black swan events during this period, compliant cryptocurrencies could see gradual, long-term growth akin to gold. BTC, in particular, may continue to rise, but its growth rate could slow over time.

As the timeline extends, predicting trends becomes increasingly difficult due to the potential for unforeseen events. By the end of Q1 2025, the election-related optimism may fade, leaving market performance tied to ongoing developments. \
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1. 2026 stands out as a promising year, particularly due to the midterm elections. Historically, midterm elections have provided greater stimulus to risk markets than general elections, as seen in 2022. While 2026’s midterms might not feature a crypto-friendly figure like Trump, they could significantly boost the altcoin market, which may be in a downturn by then. Additionally, by the end of 2026, liquidity is likely to increase, with interest rates potentially returning to low levels in Q4 2026 or Q1 2027. Whether or not QE resumes, balance sheet expansion is highly probable. Therefore, if the market weakens in 2025, it could be an opportune time to prepare for the 2026 midterm elections.

Summary

Based on the current trends, the fourth quarter of 2024 presents both opportunities and risks. While there might be a low in activity around Christmas, by the first quarter of 2025, a new wave of positive expectations is likely to arise with Donald Trump’s return to power on January 20. Just a week later, on January 29, the Federal Reserve’s meeting will be crucial. Whether or not there will be a rate cut in January could influence investors’ risk appetite. However, as the power transition phase continues, emotions may overshadow the negative sentiment from a potential rate cut. In February, earnings reports from tech stocks and the cryptocurrency industry will start to be released, and the fourth quarter of 2024 will certainly be very strong for the cryptocurrency industry. Therefore, exchanges, mining operations, and BTC reserve institutions are likely to experience explosive growth, and the earnings reports in February may fuel market sentiment, potentially leading to a new wave of FOMO.

After March, the influence of the election will gradually fade, and if there is no new progress on policies or legislation, most assets—except #BTC, #ETH, and tokens possibly applying for a spot ETF—may see a decline in investment. This is especially true for altcoins, as liquidity isn’t as strong. Even BTC and ETH will still be dependent on the funds brought by spot ETFs. More funds are likely to flow back into USD, reducing the overflow of funds and limiting support for altcoins. In March, the second Federal Reserve meeting will occur, and the possibility of a rate hike in Japan could further dampen sentiment, leading to a market pullback.

In the second quarter, as interest rates remain high, the USD may not fall easily, and without FOMO sentiment, the risk market will focus more on the “election” sector. Assets benefiting from the new administration will perform better, while others may face more difficult times. This situation could last until the earnings reports in May. As Q1 earnings are unlikely to be bad, there may be a small peak in May. However, if sentiment remains poor and there is no better risk appetite, liquidity may gradually decrease, and concerns about an economic recession could resurface. By the third quarter, expectations of a trading recession may arise, but if the U.S. economy remains strong and unemployment doesn’t rise significantly, this may not become a dominant concern. BTC and ETH should still have a good outlook, and any crypto asset applying for an ETF by that time would be worth watching.

Starting from the fourth quarter, the cryptocurrency market may become even more polarized. Cryptocurrencies with a spot ETF will benefit from off-exchange USD support, and by the fourth quarter of 2025, more U.S. states may announce that BTC will be included in pension fund investments. RWA could also start to make progress on #ETH, and SAB121 and FIT21 will likely have been passed. For BTC, BTCFi will become an inaccessible part, while ETH may see ETF staking approved, leading to increased buying power and volume for ETH, surpassing exchanges and on-chain transactions for the first time. However, liquidity will remain a key issue for other cryptocurrencies, and altcoins may begin a significant correction into the next cycle.

By 2026, inflation will begin to decrease, but the cost could be a gradual economic downturn in the U.S. Even without a true recession, the outlook for risk markets will still be poor. Apart from AI, which will continue to hold up tech stocks, other sectors will struggle. Cryptocurrency may enter a prolonged period of consolidation until interest rates continue to decrease, investor risk appetite rises, and the mid-term elections bring a boost in sentiment. By the end of Q4 2026 and Q1 2027, liquidity should be gradually restored, with a strong performance for both U.S. stocks and cryptocurrencies.

2028 will mark the beginning of a new cycle, with halving, elections, and Q4.

As I mentioned at the end of 2023, this market cycle is likely to form a double top or triple top pattern: the first top during the spot ETF period, the second during the U.S. elections, and the third during the Federal Reserve’s easing period. If there’s no easing, it could be a double top. Therefore, the first quarter of 2025 will likely mark the end of the second top for cryptocurrencies. This will be especially crucial for altcoins, as only #BTC and #ETH will benefit from the funds flowing into the market due to the spot ETF, while altcoins may lose momentum and struggle to attract funding, possibly leading to a market correction. While other cryptocurrencies may see positive news, they won’t directly benefit.

Finally, following Steven @Trader_S18’s suggestion, I’ve added a discussion on why cryptocurrency is important for the U.S. Beyond votes, what expectations does Trump have for cryptocurrency? While I may not have all the answers, we can discuss it. Some believe #BTC could resolve U.S. debt issues, but that’s too early to talk about. For now, I won’t dive into that. As for why cryptocurrency matters to the U.S., my personal understanding is that cryptocurrency represents an extension of technology, essentially the true “internet+” concept. The U.S. has always been open to innovation, and there’s a significant need for new investment opportunities, especially ones that rival gold, which the U.S. would like to control. Other major countries may not be as interested due to foreign exchange controls.

Cryptocurrency has already proven its ability to attract global capital. With clear regulatory frameworks, the U.S. could become the global crypto hub, attracting investment and driving economic growth. Europe embraced crypto earlier, but it didn’t succeed as the U.S. did. This may be closely tied to stablecoins. The mainstream stablecoins, USDT and USDC, are both dollar-pegged, and their widespread use has naturally extended the dominance of the dollar. This is something the U.S. doesn’t want to lose. From a strategic perspective, the convenience and acceptance of stablecoins far exceed traditional finance, making it more difficult for other countries to de-dollarize.

Cryptocurrency offers the U.S. a new, easily tradable investment vehicle, appealing to younger generations without the risk of total loss, akin to the difference between marijuana and heroin. Trump’s priority is America first, and being able to ensure that the U.S. stays ahead in the crypto industry is politically correct. We can again draw the analogy with marijuana and heroin—while marijuana’s addictive potential is lower and difficult to ban, it’s better to support some part of the crypto market, granting it compliance and enabling activity within regulatory boundaries. This would help maintain stability in the U.S. And BlackRock likely recognizes the “identity” the U.S. is preparing to grant cryptocurrency, which is why they’ve jumped into this space.

Of course, all of this is my personal speculation. Steven’s request to add this section is to determine whether cryptocurrency in the U.S. will be a flash in the pan like the tulip mania or genuinely become a competitor to gold. We all hope for the latter, and BTC is likely to remain an integral part of the U.S. economy and politics for a long time to come.

End of the article.

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