Here’s how a Democratic victory could affect the cryptocurrency market

Heading into the final leg of the 2024 presidential campaign, the Republican Party appears to have the upper hand with pro-crypto voters. Former President Donald Trump outlined a pro-Bitcoin (BTC 0.01%) agenda, even going so far as to proclaim that he wants America to become the “crypto capital of the planet.”

In contrast, the Democrats don’t seem to be offering much of anything. In fact, there is no mention of “crypto” or “digital assets” anywhere in the Democratic Party’s 91-page platform. The Biden-Harris administration has been largely viewed as anti-crypto, and some of the names being floated as potential economic advisers in the Harris-Walz administration are also viewed as skeptical of the cryptocurrency movement. With that in mind, here’s how a Democratic victory could affect the cryptocurrency market.

Bitcoin

A Democratic victory could limit how much Bitcoin could rise during the current market cycle. Currently, the current consensus is that Bitcoin has the potential to double in price to $100,000 to $150,000 by the end of 2025. But this solid prediction, based in part on the assumption that Trump will defeat Biden, could change now, when a Democrat victory seems more likely with Kamala Harris as the party’s nominee.

It’s not so much that the Harris administration will crack down on crypto, or adopt anti-Bitcoin policies. It’s that they don’t plan to do anything new. Unless a new development forces the Harris administration’s hand, that means no new comprehensive regulatory framework for crypto, no new tax policy to encourage crypto investment, and no new tax policy to boost Bitcoin mining.

That last point deserves special attention, given that the Biden-Harris administration has generally tended to view Bitcoin mining as energy inefficient and a drag on the nation’s power grid. In September 2022, for example, the White House released a comprehensive report on digital assets, finding that Bitcoin mining was largely in conflict with green economic policies.

Altcoins

Altcoins (usually defined as any cryptocurrency that isn’t Bitcoin) could also suffer. This is due to the impact that an uncertain regulatory environment has on investors’ risk appetite. In other words, investors are much less likely to invest in speculative currencies if there is a risk that the government will classify these currencies as securities.

Given the lack of a comprehensive regulatory framework for crypto, the SEC has largely taken the lead on crypto regulation. And that led to some jarring decisions, including a crackdown on activities like crypto staking and a lot of mixed messages about which coins might actually be securities. At one point, the SEC even suggested it Ethereum (ETH -0.66%) it could be a security!

Image source: Getty Images.

The good news here is that the Democratic Party may finally see the light. Just days before the start of the Democratic National Convention in Chicago, a group of influential crypto-investors calling themselves “Crypto4Harris” hosted a virtual town hall with several top Washington lawmakers, including Sen. Charles Schumer (D-NY ).

An important takeaway from the event was that the 21st Century Financial Technology and Innovation Act (FIT21) could be adopted very soon. This would be huge, as this pro-crypto legislation specifically calls for digital assets to be regulated as commodities, and not securities. This would mean little or no role for the SEC going forward and a larger role for the Commodity Futures Trading Commission (CFTC).

Crypto shares

Finally, it is important to consider the potential impact of a Democratic victory on crypto stocks. Primarily, this includes Bitcoin mining stocks. So far, it’s not looking good for these companies. Marathon Digital Holdings (GREAT 10.85%)for example, he has even privately hinted that he will start moving more of his mining operations overseas if the next presidential administration does not take a more pro-Bitcoin approach.

And don’t forget about Coinbase Global (CURRENCY 6.54%)the second largest cryptocurrency exchange in the world. Any deterioration in crypto market sentiment has a direct impact on trading volume and investors’ willingness to put their money into risky assets. The SEC has repeatedly taken action against Coinbase and popular coins traded on its platform, so a Democratic victory could be the green light for more of the same troubling activity.

How to Invest in Crypto in 2025

Let’s say the Democrats win the election in November 2024. Then what? You shouldn’t panic and dump your Bitcoin, of course. But you have to be much smarter about how to build a crypto portfolio. For example, you might want to look for green Bitcoin mining stocks such as CleanSpark (CLSK 6.23%) which use clean energy sources to mine Bitcoin. This idea might have more appeal in an eco-conscious administration.

That said, you should definitely keep your expectations in check when it comes to crypto in 2025. Without a big pro-crypto push from the new presidential administration, I wouldn’t hold my breath waiting for Bitcoin or other cryptos to explode wildly. value.