Cadenza Chronicle

There was only one bigger winner on election night 2024 than Donald J. Trump – Digital Assets.

Love him, hate him, or indifferent, a second Trump administration means a digital asset boom and we’re listing all the reasons why.

Setting the Stage

The loudest cheer you will ever hear from attendees at an otherwise subdued business conference came this past July at Bitcoin 2024.

This is when the then-Republican candidate for President, Donald Trump, laid out his plan for making the U.S. “the digital asset capital of the world” in a rousing keynote speech.

Hearing these words drew cheers from the capacity crowd of more than 20,000.

However, what he said next brought them to their feet.

“On day one I will fire (current SEC commissioner) Gary Gensler“

The reaction was largely warranted.

Under Gensler, the Securities & Exchange Commission exempted Bitcoin from being categorized as a security, while green-lighting Ethereum futures exchange traded funds (ETFs).

All welcome first steps, but falling far short of approving spot stablecoin ETFs catering to the retail market or legitimizing the digital asset market by introducing streamlined regulations.

In the past, Gensler has acknowledged that “many digital assets (besides Bitcoin) still lack sustainable use cases“.

Now, following a decisive Trump win on November 6th, the stage has been set for a seismic shift.

A Simple Set of Rules

The gulf between what the digital asset industry wants and what policymakers want has never been narrower.

But before any sweeping legislative changes can be enacted, a few things will have to happen first.

First, as Trump has pledged, a digital asset advisory council will need to be formed.

To date, no names have been put forth for who may be part of this council, but it will set the pace for everything else.

We can only hope that it will be some form of digital asset industry Avengers, made up of entrepreneurs, operators, and VCs of course, representing the entire ecosystem.

While this council assembles, new Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) chairs will also be appointed.

Only then will the process of federal digital asset regulation commence.

Although plenty of uncertainty remains, one thing is for sure.

New rules won’t overstep, thanks to Elon Musk and Vivek Ramaswamy’s new Department of Government Efficiency (DOGE).

Nor will they go beyond digital asset registration and mandatory disclosures. Two things that will bring confidence and clarity to underscore the next phase of growth.

A Stand Down Order

Besides bringing order to an otherwise chaotic market, there is one other thing that has been proven to unleash innovation like nothing else…

Government getting out of the way and letting entrepreneurs do what they do best – finding solutions to difficult problems.

From this perspective, current administrations haven’t exactly stood down, doling out billions of dollars worth of fines to digital asset enterprises on an annual basis.

One prominent digital asset exchange even went so far as to take legal action to force courts or regulatory agencies to take a definite stance on whether certain digital assets should be classified as securities or commodities under U.S. law.

For entrepreneurs in the digital space, this has just been par for the course.

Nevertheless, despite operating in legal gray areas, with little to no support from traditional financial institutions since inception, they have still managed to create more than $3 trillion of value and counting.

Now, with the most digital asset-friendly administration ever in office, who likely won’t just stand down from taking aggressive regulatory action against the industry, but also streamline the complicated legal maze, digital assets are poised to enter a bull market.

There is also one more thing that will act as a catalyst.

A Strategic Reserve

During Trump’s raucous speech at the Bitcoin 2024 conference, he made a bold promise with far-reaching implications:

“It will be my policy to keep 100% of the Bitcoin the US government currently holds or acquires. This will serve as the core of the national strategic Bitcoin stockpile.”

What could a strategic stockpile look like and how likely is it to happen?

On the first point, Bitcoin has been the best-performing asset over the past decade. Beating out the next best-performing (NASDAQ 100 composite) by more than 10x.

Even more importantly, it’s increasingly become an inflation hedge against a depreciating US Dollar.

Proponents have known this and have put forward proposals such as the Boosting Innovation, Technology, and Competitiveness (Bitcoin) Act.

Introduced this past summer, the bill advances the establishment of a strategic Bitcoin reserve via the purchase of one million Bitcoins over the span of a five-year period and puts forth that “all Bitcoins acquired under the bill must be held for at least 20 years unless used to retire outstanding federal debt“.

The bill was referred to the Senate banking, housing, and urban affairs committee where it has languished ever since, but given the renewed enthusiasm, it could soon be tabled and heard.

Short of a federal Bitcoin reserve, several states could also introduce similar legislation, with Pennsylvania being the first to do so.

The Pennsylvania Bitcoin Strategic Reserve Act was introduced earlier this month and proposes to allow both state treasury and pension funds to hold BTC on their balance sheets.

In a major step in the right direction, another piece of pro-Bitcoin legislation, the Bitcoin Rights bill, meant to protect residents’ rights to self-custody digital assets and use them as a method of payment, was just passed.

The Strategic Reserve Act could follow and be signed into law next year.

So it’s not a question of if we get a Bitcoin reserve, but when and in what form.

All of this is now happening nearly a decade after digital assets first became a part of the public consciousness.

Although it continues to be one of the most volatile asset classes, it is becoming more understood with each passing day.

This understanding has led to adoption by an early minority that includes El Salvador, which was the first country to make digital assets legal tender and Switzerland, which already passed legislation enabling its central bank to hold digital assets as reserves.

Now, the United States is about to join such early adopters, turning the tide into a majority, and ushering in a golden age for digital assets.

If you found this article insightful, you may also like Digital Assets for Everyone: How ETFs are Taking the Blockchain Mainstream or From Blocks to Billionaires: The Story of Bitcoin’s Expanding Ecosystem.

If you would like more information on our thesis surrounding digital assets or other transformative technologies, please email info@cadenza.vc