The 2024 U.S. election outcome crystallized earlier than most initially expected.
Trump claimed victory as prediction markets showed his odds approaching 100% on Polymarket, while major media outlets began calling the race in his favor early Wednesday.
Congress-wise, the Republicans are set to take back the Senate, and a likely slim control of the House was still a jump ball when this note went to press. Make no mistake, however, that the upcoming 119th U.S. Congress will be the most pro-crypto Congress ever. According to Stand With Crypto, an industry policy advocacy group, the number of pro-industry candidates elected outweighs their detractor peers by 2.2x in the House and 1.5x in the Senate.
BTC is up more than 7% over the past 24 hours on strong volume, briefly breaching and now trading near all-time-high territory. The rally is broad, with every single asset with a circulating market cap of more than $1 billion in the black. Among alts, DOGE, likely due to the Elon Musk association, jumps almost 20% to lead gains among the larger names, while UNI, potentially one of the main beneficiaries of a regulatory unlock in the US, climbs over 30% and leads gains among all assets with a $1B+ market cap.
Perhaps some of the most interesting price action happened in the options markets.
Heading into the event, crypto derivatives markets exhibited a near-term premium on downside protection. While post-November, 25 delta skew in both majors was trading call favored, the front end of the curve was trading slightly put favored, indicative of some near-term bearish sentiment as market participants awaited the election results. As it became apparent that Trump would likely be deemed the next President, the front end of the curve for both BTC and ETH flipped call-favored.
As markets got further clarity on the election, volatility also trended significantly lower. Heading into the election, BTC IV was pricing in a premium, as traders braced for potential elevated volatility. On Monday, BTC 8Nov IV was trading at ~90v, the most elevated expiration across the term structure, and 20v higher compared to the end of last week. 8Nov IV temporarily surpassed 100v as polls closed on Tuesday, though IVs for near-dated expiries have, as expected, now trended significantly down as markets have received more clarity on the election outcome.
Looking forward, the focus should now quickly shift to what the election means for the industry.
On the executive power side, one key place to look is the Bitcoin and Crypto Presidential Advisory Council. This group will be put together and tasked with designing transparent regulatory guidance for the industry within the first 100 days of the new administration—using Trump's own words from his speech at the Bitcoin Nashville conference in July.
Trump also said he would prevent the government from selling its BTC holdings. Although he refrained from advocating for a national strategic Bitcoin reserve—a proposal announced by Wyoming Senator Cynthia Lummis at the same event (more on that later)—the topic of how much BTC the U.S. government should hold will likely gain traction in the coming months.
Agency head appointments will also be a key theme, with the SEC in clear focus.
All eyes are on Hester Peirce, the crypto-friendly SEC commissioner who has penned numerous dissent letters over the years. Peirce, however, is reportedly looking to leave the agency at the end of her term in June 2025. It remains unclear whether Peirce could be persuaded to stay at the SEC if called by the president or if Trump would turn to Mark Uyeda, who is reportedly more interested in the role.
Beyond the White House, Congress is also likely to play a key role in achieving a clearer regulatory and policy framework for the industry.
Bernie Moreno defeated incumbent Sen. Sherrod Brown, the chairman of the Senate Banking Committee who had voiced anti-crypto views in the past. Moreno was supported by a leading crypto super PAC. This major win could serve as a blueprint for future electoral campaign engagement.
Other impactful areas of potential change in the Senate include the Agriculture Committee, which could have Sen. John Boozman, who has supported CFTC supervision of crypto, as chairman. In the House, the key committees to watch are the House Financial Services Committee, where industry-friendly Rep. Patrick McHenry chose not to run for another term, and the House Agriculture Committee, currently chaired by crypto proponent Rep. Glenn "GT" Thompson. On top of those, the Senate Finance and House Ways and Means Committees can influence how crypto taxation is approached.
From a policy perspective, these are the three most market-impacting themes that could shape Congress discussions in the next few quarters:
- Stablecoin Legislation: This is likely the lowest-hanging fruit, as we were not very far from reaching a consensus among both sides of the aisle in 2024, a testament to how the view that stablecoins can support US Dollar dominance has become consensus.
Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) introduced a bipartisan bill in the Senate, and Rep. Patrick McHenry, who decided to retire from Congress at the end of the current term, introduced a different bill in the House. The main difference between these two bills is likely how they approach the issue of Federal versus State issuer authorization, and other differences include the explicit mention of a ban on algorithmic stablecoins or whether they are part of a broader regulatory framework. - Crypto Market Structure Legislation: The Financial Innovation and Technology for the 21st Century (FIT21) Act delineates the roles of the CFTC and the SEC by clarifying when digital assets should be classified as commodities or securities based on decentralization criteria. The bill also includes provisions for enhanced consumer protections and encourages regulatory coordination between the CFTC and SEC.FIT21 has passed in the U.S. House of Representatives in a historic bipartisan vote but has faced significant challenges in the Senate in no small measure by the opposition of Senate Banking Chairman Sherrod Brown, who lost his race, and Senator Elizabeth Warren.
Although there are likely more open points of discussion than stablecoin legislation, it’s hard to overstate how positive greater market structure clarity can be for the market. Such clarity could open room for additional crypto ETF products, covering the main crypto assets and potentially also a broader crypto index, and give entrepreneurs and investors more comfort in U.S. token launches. - The Bitcoin Strategic Reserve: The Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act introduced by Senator Cynthia Lummis proposes establishing a strategic Bitcoin reserve for the United States. It is still in the early stages of consideration and has not yet advanced significantly in Congress. However, it can gain traction in the new administration, as mentioned above.
It’s hard to think how the election outcome could have landed better for the industry, and expectations of key regulatory improvements are likely to build in the coming months and quarters. Yet short-term risks abound, particularly from midnight rulemaking and last-minute enforcement actions by departing officials. Market participants active during the past government transition certainly remember former Treasury Secretary Steve Mnuchin, a crypto-critical official under Trump's first term, dropping new rules on a Friday night just before Christmas.
Incredibly, there are still additional market events this week. The FOMC meeting kicks off tomorrow, with CME Fed funds futures pricing in a near-certain 25bps cut at 98% odds. While the rate decision seems locked in, any hints about future monetary policy could still jolt markets. Liquidity trends over the next few days could also serve as key indicators of the rally's staying power.
