(Kitco News) – The political scene in the U.S. was thrown into turmoil this week after President Joe Biden announced he was withdrawing from the 2024 Presidential election following weeks of speculation, elevating Vice President Kamala Harris to the top of the ticket.
Months of forecasts and debate about whether Biden or former President Donald Trump would be better for the country have now been rendered moot. The focus is now on the matchup between Trump and Harris, though her role as the leading candidate remains up for debate.
As noted by Jamie Harris, Chair of the Democratic National Committee, after Biden announced his withdrawal: “The work that we must do now, while unprecedented, is clear. In the coming days, the Party will undertake a transparent and orderly process to move forward as a united Democratic Party with a candidate who can defeat Donald Trump in November. This process will be governed by established rules and procedures of the Party. Our delegates are prepared to take seriously their responsibility in swiftly delivering a candidate to the American people.”
With Kamala Harris currently leading among Democratic contenders, the debate about whether she or Trump will be better for financial markets, and specifically cryptocurrencies, is picking up, with some seeing Harris as friendlier to the industry than her predecessor, though not as supportive as Trump, the self-dubbed ‘Crypto President.’
When asked if this development is positive, negative, or neutral for cryptos, Vijay Pravin Maharajan, CEO and Founder of bitsCrunch, said, “It’s hard to say.”
“If Trump is serious about backing crypto, his potential re-election could take the industry to new heights,” he said. “Trump’s unprecedented support for crypto has energized the community, many of whom believe he will take steps to integrate digital assets into the fabric of Americana if re-elected. While Trump seemingly had an easy path to victory against Biden, going up against a more capable and coherent Harris will mean he will need to up his game and be more specific about how he plans to back crypto, which could be a net positive for the industry.”
“So far, Trump has made vague proclamations about embracing crypto if he secures a second term in office,” Maharajan noted. “However, he has yet to back that up with clear, specific plans and policies. If he secures a second term, he will likely counsel industry figures such as Elon Musk on how to ensure the U.S. remains at the forefront of Web3 innovation moving forward.”
When it comes to Harris and the Democrats, Maharajan said they “must surely realize that Trump’s favorable crypto stance is resonating with the wider Web3 community, making him the popular choice for crypto enthusiasts. Crypto has certainly become an important election issue, and the Harris campaign should recognize the value in establishing a progressive regulatory framework, as opposed to dampening market momentum with restrictive policies.”
“The expected contentious battle for the U.S. presidential nomination could add to recent volatility in the crypto market, especially while there is uncertainty around candidates' regulatory stances – particularly those of Vice President Harris,” he added. “Trump’s recent rhetoric has driven market optimism, while the perception of a more prudent Harris ticket could lead to the expectation of stricter regulations, potentially triggering sell-offs.”
As for Trump’s odds of winning, Maharajan noted that “Biden’s decision to drop out of the race seems to have been informed, at least in part, by the latest polling data which suggested that Trump had become the odds-on favorite to beat him in the November election.”
“While the recent assassination attempt on former President Donald Trump may have endeared him among certain voters, the strong belief among Democrats is that Harris can attract significant levels of support in the run-up to the election, potentially undercutting Trump’s momentum and his chances of re-election,” he said. “If Harris can outline her stance on a range of key areas, and demonstrate how this differs from that of the Trump/JD Vance ticket - particularly on abortion - it could be a much closer contest than people expect.”
“The news is bullish for crypto,” said Mostafa Al-Mashita, co-founder of Secure Digital Markets. “Biden has been one of Washington's harshest critics of digital assets. With a much younger democratic ticket on its way to securing the nomination, I expect the new Democratic agenda to be more open to digital assets and fin-tech innovation at large.”
He added that “Harris actually doesn’t have a lot of strong crypto opinions on record either way. However, it is reasonable to assume that she will not deviate too far away from the Biden administration's previous stance on the topic in an effort to not ‘rock the boat’ more than Biden's withdrawal already has.”
While it's difficult to say exactly how the regulatory landscape will evolve until we know for certain who the Democratic nominee will be, Al-Mashita suggested that “any level of uncertainty throws entropy into the system, and markets do not respond well to uncertainty. I think a battle for the Democratic nomination might cause some short-term turbulence, but long-term this is a bullish signal towards the future. Crypto now has a more favorable outlook than it did before Biden’s announcement.”
As for Trump's odds of winning, he noted that “Prediction markets have responded with a decisive +12% drop in Trump's election odds; a clear sign that the market believes Trump's easiest pathway was through Biden. But without a Democratic nominee, the Republican's new strategy remains a bit of an unknown X-factor.”
Matthew Le Merle, CEO of Blockchain Coinvestors, said anyone who holds a less contentious opinion on digital assets will be better than a second Biden administration.
"Given the extreme negative stance towards digital assets of Biden and his inner team, including Warren, Gensler, and Gruenberg, it is almost certainly excellent news for blockchain and crypto that the US will have new leadership after the November election - whichever party wins the Presidency, Senate and House of Representatives, they will be more in favor of innovation and its ability to improve the global financial system,” he told Kitco Crypto.
"Until we see who the Democratic party selects as its presidential candidate, it is difficult to be definitive, but since he or she will surely be younger, and younger Democrats are overwhelmingly in favor of digital assets, it is likely this will be very positive news for blockchain and crypto,” Le Merle added.
"Trump and his selected vice presidential candidate Vance have moved quickly to declare that they are pro blockchain and crypto,” he noted. “The reason is that digital natives (those under 45) now represent 50% of the U.S. population, and it is estimated that as many as 90 million of the US's 160 million voters own at least some digital assets. That is a lot of votes up for grabs and we expect both parties will quickly become pro-blockchain and crypto in their desire to win those votes to their side.”
Le Merle said this latest turn of events is nothing new for the crypto community, which has dealt with setbacks and political roadblocks since Satoshi Nakamoto launched Bitcoin in 2009.
“Short-term uncertainty is not good for markets or investors, however, in the specific case of blockchain and crypto investors, we have lived with legislative and regulatory uncertainty since 2009,” he said. “A few more months of political uncertainty in the US makes little difference. The good news is that almost every other country in the world is now firmly pro-digital assets and is moving fast to put in place pro-innovation laws and regulations to accelerate the industry.”
“Digital assets are inevitable, and all of the world's financial infrastructure is in the process of being upgraded. This will be the greatest value-creation event the world has ever seen,” he concluded. “All of this is obvious to the next generation of leaders, and fortunately we are now seeing a generation of American leadership that was anti-innovation and anti-digitalization leave the Washington halls of power. That is good for every American.”
Same old playbook
“Kamala Harris is just more of the same from the Democrats,” said Michelle Bond, founder of Digital Future. “She’ll continue the Biden/Gensler stances that are bad for crypto; we shouldn’t expect any policy changes if she were to get the nomination and win the election.”
“Trump is still expected to win regardless of the Democratic candidate,” she added. “The American public does not appreciate the shenanigans at the top of the ticket. Swapping candidates at the last minute simply does not feel like a democratic process.”
“We all knew Biden had deteriorated, especially Kamala, so this is really disingenuous,” Bond said. “Thirty days is no real-time to vet a VP pick or Kamala as president. She is not well-liked even among Democratic leaders and it’s likely she was endorsed because of financial and optics reasons. In all reality, Biden should just resign effective immediately as the Speaker of the House has called on him to do.”
Many analysts agree with Bond that the move by Democrats is less than ideal and highlights a history of “shenanigans” with the DNC, including their 2016 push to give Hilary Clinton the nomination when Bernie Sanders was leading in many polls.
“The Democrats unfairly eliminated RFK Jr. from the primary and now seem poised to nominate Kamala Harris, who did not receive primary votes,” said Michal Pospieszalski, CEO of MatterFi. “I believe Harris will be a formidable opponent for Trump, unlike Joe Biden, who was significantly damaged by both the debate and the Democrats' failed policies.”
“Essentially, the Democrats undermined their own candidate against the will of the voters because they were caught lying about his condition,” he added. “While it's still cheating, it was a strategic move on their part. Biden had no chance after the debate.”
“Historically, Democrats have been unfavorable towards cryptocurrency, seeking to regulate and tax the industry heavily,” Pospieszalski said. “Thus, their increased chances of success do not bode well for the crypto market. After deceiving the American people for four years, coupled with potential fraud in mail-in voting (though proper forensics were never conducted), I hope they lose decisively. At least now they have a candidate they can control who is physically capable, making it a more competitive race against Trump.”
He added “Having lived under Kamala Harris in California, I found her to be a harsh prosecutor who aggressively pursued gun control measures and incarcerated many for marijuana offenses. They have also twice sidelined Bernie Sanders, changing their rules whenever they face the threat of losing.”
Effect on crypto
Peter Moricz, Partnerships Lead at DLC.Link, said it's still too early to know if Harris’ nomination is good or bad “since we don’t know her crypto policy,” leading DLC.Link to adopt a “neutral stance.”
“If she picks a crypto-friendly Vice President, the balance could be tilted to a more positive side,” he suggested. “For example, Andy Beshear, Governor of Kentucky, relies on boom-and-bust industries like fossil fuels and is desperate to attract crypto miners. Beshear has signed two laws giving tax breaks and other incentives to miners. He also approved the creation of a Kentucky blockchain working group.”
But Moricz doesn’t see the decision as having a major impact on the crypto market. “Besides keeping a close eye on it and getting crypto owners to vote, I am not sure if it will affect the market as much as every other market monitoring it,” he said.
“The Crypto community thinks too much of itself to tilt the nomination one way or another,” he added. “This time around, there are much bigger topics to vote on than crypto. In the bigger picture, it doesn't impact that much, but they are making a lot of noise around it, raising awareness of how heavy-handed the SEC was in enforcement.”
That said, Moricz acknowledged that just the fact that we are “having this conversation about crypto and Presidential voting shows how far the crypto industry has come.”
“Even though I don't agree with some of the aggressive ways the people in the Crypto community have been acting, I cannot deny the results they have achieved and elevated crypto into mainstream discussions,” he said. “The BTC ETF, and now the ETH ETF, show that digital assets, once perceived as something only used by criminals on the dark web, are now being used by everyone; it's time for sensible regulation from whoever will be the next occupant of the White House.
“The development is neutral for cryptos,” said Adam Koprucki, founder of RealWorldInvestor.com. “Harris will likely push for a legislative agenda similar to Biden's i.e., more regulation and federal oversight over the crypto market.”
“I think overall the crypto market would rally under a Trump win due to the likelihood of fewer potential regulations, you may see cryptos like Bitcoin rally over a trump win,” he added, before noting that “The race is now closer.”
“You'll see betting markets sway once Harris announces her VP pick,” he said. “Blue wall states will likely flip November for either candidate.”
Aligning with Koprucki’s outlook was that of Pat Doyle, Blockchain Researcher at Amberdata, who also said, “This is relatively neutral for the crypto markets.”
“Under the current administration, crypto has been moving forward and gaining more regulatory clarity; however, it is at a slower pace than the pro-crypto audience would like,” he said. “I imagine that the move to more clear regulation continues but under a Trump administration, I think it will be pushed forward at a faster pace. Rumors are circulating that Trump will speak to a US BTC reserve policy at BTC2024. While this remains a rumor, I think the probability of such pro-crypto statements being made by Harris is low.”
“Trump's odds of winning have remained relatively consistent across Polymarket since the announcement of Biden dropping out of the race,” Doyle added. “You can see that Harris’ probability of winning is just picking up Biden's market and not taking market share from Trump.”
Rennick Palley, founding partner at Stratos, also sees the shakeup as “a neutral to marginally positive development” for cryptos.
“Kamala Harris may have a slightly higher chance of winning the election than Joe Biden but her stance on crypto is a bit of an unknown, although there are rumors that her admin could be pro-crypto, or at least more so than the current administration.”
That said, Palley noted that “a lot of the hostility against crypto is coming from Senator Elizabeth Warren and her sphere of influence,” and highlighted that “Warren recently endorsed Harris, which may suggest pressure to maintain the negative stance.”
As for the turmoil that has ensued following the political shakeup, he said at Stratos they “generally view chaos in our institutions as a net positive for crypto, as it emphasizes the need for decentralized, trustless systems that don't depend on the government.”
“Between the failed Trump assassination and Joe Biden stepping down from the race with a tweet, the trust in our institutions is at an all-time low,” he said. “In contrast, there has never been a better time to be long crypto as a protest vote against the current system.”
“A contentious battle for a political nomination can significantly impact the crypto market in several ways,” said Evan Varsamis, founder and CEO of Mintify. “Political uncertainty often leads to market volatility. Investors may react unpredictably to news and developments, causing rapid fluctuations in crypto prices.”
“A contentious battle may bring heightened attention to crypto policies, influencing investor sentiment based on perceived regulatory risks or opportunities,” he added. “The outcome of the nomination battle could signal future legislative actions. A nominee with a crypto-friendly stance might boost market confidence, while one favoring stricter regulations could dampen it.”
Analysts at Bitfinex provided a more technical analysis of the situation, suggesting that it will take some time to know how the situation will materially impact digital assets.
"Bitcoin initially declined 3% following Biden's announcement but subsequently recovered,” they noted. “We believe this was a knee-jerk reaction to temporary uncertainty in the market. By Monday morning, it had increased by 0.9% over the previous 24 hours, moving past $68,000, which is close to its all-time high of $73,666, reached in March.”
“The impact of Biden stepping down and Harris taking the lead on the cryptocurrency market can be multifaceted and is likely to be perceived as neutral to slightly negative in the short term due to the uncertainty and potential for policy changes,” they said. “However, the betting markets still heavily favour Trump winning. With Trump's recent pro-crypto advocacy, the market is hopeful that Trump will look at crypto as a technology which can provide more jobs.”
They suggested the market could trade in a holding pattern until Harris’ nomination is confirmed and her stance on crypto becomes clearer.
"Investors might adopt a wait-and-see approach until Harris's policies become clearer,” the analysts wrote. “The current administration has been relatively cautious regarding crypto, with a focus on regulation. A continuation of this stance under Harris might not be immediately positive for the market.”
“Kamala Harris's stance on cryptocurrency isn't well-documented, making it difficult to predict with certainty,” they noted. “However, Harris's political positions suggest a focus on consumer protection and financial regulation, which might imply continued scrutiny of the crypto market.”
The analysts warned that “A contentious battle for the Democratic nomination could introduce significant uncertainty, potentially leading to market volatility. However, it is difficult to comment on a clear market direction as it would depend on how the market prices in odds of a Democrat or Republican win.”
Addressing the odds of a Trump victory, Bitfinex analysts noted that, “Following the assassination attempt on his life, Trump experienced a significant rise in the polls.”
“At the beginning of the 2024 Republican National Convention, shortly after the assassination attempt, his odds of winning stood at 69%, according to BetFair Exchange,” they said. “However, after Biden exited the race on Sunday, Trump's chances decreased to 62%.”
“With Biden endorsing Ms. Harris on Sunday and additional endorsements from prominent Democrats, her chances have increased to 29%, marking the highest level recorded for the current vice president, but still significantly behind Trump,” they concluded.
