Bitcoin(CRYPTO: BTC) has to surges to new all-time highs since the presidential election, rising nearly 30% and trading near the $90,000 mark. Some investors now think that Bitcoin could break through the $100,000 mark before Donald Trump is even inaugurated as the next U.S. president.
Obviously, the market is sending a signal that Trump's election win is good for crypto. But what exactly does that mean in practical terms? Here's a closer look at three key ways that a Trump administration could change the future of crypto.
A new pro-business environment for crypto
On the campaign trail, Trump told his supporters that he wanted to make the U.S. the "crypto capital of the world." That starts with making the country a place where crypto companies and crypto investors want to do business. And that, most likely, means a fundamental rethinking of the regulatory landscape for crypto, which now is dominated by the Securities and Exchange Committee (SEC).
Since the SEC has often voiced its concerns about crypto, that has made it difficult, if not impossible, for some companies to do business. Take Coinbase Global(NASDAQ: COIN), for example. It has been fighting the SEC on a range of different issues related to crypto, and has even hinted that it might take some of its business offshore to more crypto-friendly jurisdictions.
That's the case, too, with Ripple Labs, the company behind the XRP(CRYPTO: XRP) crypto token. It, too, has been engaged in an epic battle with the SEC, and it has been forced to take some of its business overseas. Meanwhile, the price of XRP continues to languish at less than $1 amid regulatory uncertainty.
In 2025, look for Congress to pass favorable new crypto legislation. Sentiment appears to be shifting in Washington, and this legislation has bipartisan support. At the very least, Trump has pledged to replace the current head of the SEC, Gary Gensler, with someone who is more friendly to crypto.
Creation of a strategic Bitcoin reserve
Another history-making move would be the creation of a strategic Bitcoin reserve. As envisioned now, this would require the U.S. to buy 1 million bitcoins during the next five years. By the end of that time, the U.S. would own about 5% of all Bitcoin in circulation, making it a crypto superpower.
Where things get interesting is when you consider what could be done with that strategic Bitcoin reserve. You can think of it as being similar to the nation's Strategic Petroleum Reserve: a backup resource that can be used during extraordinary times to stabilize the economy. From time to time, the U.S. might be able to dip into its Bitcoin holdings to achieve certain economic goals.
The really big idea is to use the strategic Bitcoin reserve as a way to pare the nation's $35 trillion debt load. If the price of Bitcoin increases exponentially -- as some investors think it will -- then some of those crypto gains might be used to pay down that debt. For example, if Bitcoin does skyrocket to a price of $1 million, as Cathie Wood of Ark Invest has suggested it might, those 1 million bitcoins would be worth $1 trillion.
The good news is that there is already legislation ready to go. Known as the BITCOIN Act of 2024, it was introduced this summer by Senator Cynthia Lummis (R-Wyoming), when President-elect Trump was still on the campaign trail. As soon as Trump won the election, Senator Lummis sent an enthusiastic post on social media: "We are going to build a strategic Bitcoin reserve."
A revamped Bitcoin mining industry
President Trump has suggested that he'll work with the nation's Bitcoin miners to ensure that all Bitcoin mined in the future is mined domestically. If you listen to some of Trump's speeches from the campaign trail, it's clear that he views Bitcoin mining the same way he views coal mining: It creates jobs, it stimulates economic growth, and it can be an economic lifesaver for rural communities located near cheap energy sources.
Image source: Getty Images.
So what would a new strategic initiative related to Bitcoin mining look like? The speculation now is that it will be folded into a much larger initiative related to national energy policy. That could include an upgrade of the nation's energy grid. And it could include less emphasis on clean energy being used for the energy-intensive Bitcoin mining process. As a result, the cost of producing new Bitcoin could become cheaper. If that happens, Bitcoin mining stocks could soar in 2025.
How realistic are these pro-crypto policies?
Just keep in mind: Campaign promises do not always come to fruition. So it's easy to see how some of the bolder crypto-related initiatives supported by Trump -- such as the creation of a strategic Bitcoin reserve -- might not happen.
And it's still not clear what role some of the pro-crypto advocates supporting Trump, such as Elon Musk, will play in the new Trump Administration. Will Musk, for example, find a way to use Dogecoin(CRYPTO: DOGE) within the planned Department of Government Efficiency (DOGE)?
Overall, though, it's hard not to see how the new policies under consideration will be positive for crypto, and especially Bitcoin. CNBC is already calling this the Trump trade: You buy crypto because you think Trump will be positive, and you don't overthink it.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and XRP. The Motley Fool has a disclosure policy.
