As a seasoned crypto enthusiast with over a decade of experience in this wild and wondrous world of digital assets, I am thrilled to see the winds of change blowing through the regulatory landscape. The incoming Trump administration, with its apparent soft spot for Ethereum and DeFi, promises to usher in a new era of acceptance and growth for our beloved industry.
Over the past 18 months, Ether on Ethereum (ETH) has struggled to keep pace with its competitors. In contrast to ETH, Bitcoin (BTC) and several other layer-1 coins such as Solana (SOL) and Sui (SUI), have significantly surpassed it in performance.
Over the past 18 months, Ethereum (ETH) has seen an increase of 88%. In stark contrast, Solana (SOL) has soared by a massive 1040%, and Cardano’s Sui (SUI) has surged by 448% during the same time period.
Bitcoin, a choice that drew massive institutional interest, and Solana, which garnered significant attention from retail investors. ETH seemed to be the less favored option according to Bitwise’s chief investment officer Matt Hougan when speaking with CryptoMoon.
As a researcher delving into the cryptocurrency realm, I find myself intrigued by the perspectives held by industry experts. They posit that the election of Donald Trump in the U.S. and the anticipated crypto-friendly policies from key agencies under his new administration could potentially signal a significant shift in Ether’s market performance. Notably, the incoming president’s family has ventured into the decentralized finance (DeFi) sector by launching their own project, World Liberty Financial, on the very same blockchain.
2025 looks promising for ETH as experts consider several potential advancements that could bolster a favorable outlook: from the waning of financial skepticism to significant changes within the US Securities and Exchange Commission, beneficial regulatory updates, Ether exchange-traded fund (ETF) staking, and increased supervision by the Commodity Futures Trading Commission (CFTC) over cryptocurrencies.
As a researcher, I’d rephrase that statement as follows: “Among various blockchain protocols, I believe Ethereum stands to gain the most under a potential Trump administration. This is primarily due to its significant size and maturity compared to other ecosystems, with Bitcoin being mature but somewhat limited in scope.
Simultaneously, the sheen on Solana has begun to fade, following a peak in its SOL token price at a record high of $264 just last month, which has now dropped to $192 due to worries about impending token releases.
End of crypto’s financial nihilism
One of the big factors weighing heavily on Ethereum’s price has been the aggressive approach of regulators toward alleged securities violations by ecosystem projects including Uniswap, Consensys, Lido and Rocket Pool. Memecoin projects, meanwhile, have been largely overlooked by the SEC.
A related issue is the disillusionment of crypto natives who were dumped on by venture capitalists during the brutal bear market. Many have turned to fair-launch memecoins and other hyper-speculative assets with little utility. Ikigai Asset Management founder and chief investment officer Travis Kling calls this phenomenon “financial nihilism.”
In his essay dated March 12th, Kling argued that the concept of financial nihilism places minimal or no emphasis on “fundamental” aspects or any idea of a substantial “underlying justification.
“Financial Nihilism goes hand in hand with Populism – a political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups.”
According to Kling, both Financial Nihilism and Populism stem from a common sentiment: “This current system isn’t benefiting me, so I’m inclined to explore drastic alternatives, such as investing in an unconventional currency like SHIB or supporting an unorthodox political figure like Trump.
Instead, it’s worth noting that Ethereum is primarily purchased based on its underlying principles and functionality. Its supporters frequently argue that the blockchain platform, along with its layer 2 solutions, represents the future for legitimate, customizable digital currency, smart contracts, and decentralized finance operations.
Trump’s SEC overhaul is good for DeFi
As a crypto investor, I find Saul Rejwan’s perspective intriguing. If Trump maintains his pro-crypto stance, it could shift the narrative away from financial nihilism towards more legitimate projects being embraced by regulators rather than constantly facing SEC’s Wells notices.
December 4 saw President Trump nominating a pro-cryptocurrency entrepreneur and ex-SEC Commissioner, Paul Atkins, as his pick for the upcoming SEC chair. It is expected that the current chairman, Gary Gensler, will step down from the agency on January 20.
Under President Trump’s term, the Securities and Exchange Commission (SEC) is set to lose three Democratic commissioners. Specifically, Jaime Lizarraga has announced his departure from the agency effective January 17, and more recently, the Senate Banking Committee has postponed the reappointment vote for commissioner Caroline Crenshaw, who is known for her skepticism towards cryptocurrencies, on December 17.
In normal circumstances, the Republican party, being in power, usually appoints a majority of three commissioners at the Securities and Exchange Commission (SEC). However, due to recent rapid departures and cancellations, there’s a potential for an unexpected alignment of four commissioners who are favorable towards cryptocurrencies if President Trump decides to go against tradition.
Rejwan told CryptoMoon that legitimate sectors of the crypto industry, specifically DeFi and decentralized physical infrastructure (DePIN), stand to benefit most from the new administration and a more crypto-friendly SEC.
In a more supportive regulatory climate, DeFi projects are expected to flourish. Areas such as restaking could benefit greatly from minimal regulatory guidance in order to attract institutional investors.
“We expect this new leadership to lower barriers to entry and make it easier for early-stage crypto entrepreneurs and resilient firms to innovate and thrive.”
Under the leadership of Gensler at the SEC during the Biden administration, there’s been a well-known adversarial stance towards Decentralized Finance (DeFi). Earlier this year, they targeted Uniswap, the biggest decentralized exchange on Ethereum, expressing regulatory concern.
The Securities and Exchange Commission (SEC) is considering broadening the criteria for entities classified as exchanges under the Exchange Act of 1934. They believe that digital market participants within Decentralized Finance (DeFi) should be included in this definition.
According to Anoop Nannra, the CEO of Trugard Labs, he anticipates that the Securities and Exchange Commission (SEC) will make significant changes in their enforcement actions and strategic directions. He believes that digital assets such as cryptocurrencies will likely be categorized as “property” under the new administration.
In his own words, he mentioned that numerous individuals close to President Trump have conveyed that property rights are of paramount importance for this administration. Furthermore, he suggested that the Republican Party’s stance on cryptocurrency could potentially be defined by this focus on property rights.
“I expect to see a complete revamp of the SEC’s position based on this.”
On December 19th, the Token Alliance (a group co-chaired by incoming SEC Chair Paul Atkins) held a meeting with staff members from Commissioners Hester Peirce and Mark Uyeda’s offices. During this gathering, they presented their list of top priorities. Among these requests was for the SEC to publicly disavow the contentious 2018 “Hinman speech” and rescind a collection of rules that had previously classified DeFi participants as “exchanges” under the law.
In simpler terms, Nannra suggested that the Commodity Futures Trading Commission (CFTC) might become more lenient towards digital assets, and he anticipated that the Securities and Exchange Commission (SEC) would have more collaborative conversations with the CFTC in the future.
According to Nannra, it’s likely that the Commodity Futures Trading Commission (CFTC) will adopt a more forward-thinking stance regarding cryptocurrencies. This could potentially lead to a better balance in regulatory oversight between the Securities and Exchange Commission (SEC) and the CFTC.
SEC vs. CFTC: Does FIT21 even matter?
According to several experts, the Financial Innovation and Technology for the 21st Century Act (FIT21), which was recently approved by the House in May, is likely to play a significant role in harmonizing the views of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) regarding cryptocurrencies.
Essentially, the proposed legislation aimed to establish a national structure for cryptocurrency oversight, limiting the Securities and Exchange Commission’s control in this area, and transferring the responsibility for regulating direct crypto trading markets from the SEC to the Commodity Futures Trading Commission (CFTC) instead.
Since the Commodity Futures Trading Commission (CFTC) classifies Ether as a commodity, some experts believe that FIT21 could potentially offer significant advantages for Ethereum in terms of policy.
Given the shift in regulations, there’s a doubt about the necessity or even attractiveness of the FIT21 bill now. It might turn out to be an unneeded political compromise on cryptocurrencies, which is no longer relevant in our current favorable regulatory climate for these assets.
As a researcher, I’ve recently observed that in a client alert dated November 15th, attorneys from the law firm Brownstein hinted at the temporary halt of the bill. However, they suggested that this bill could function as a foundation for legislative initiatives in the upcoming Congress.
Regardless of whether FIT21 passes, Trump is reportedly considering handing the CFTC oversight over crypto during his upcoming term, which would also classify most crypto projects as commodities if they meet certain criteria.
Should the Commodity Futures Trading Commission (CFTC) take charge of cryptocurrency regulation, it could prove beneficial for the sector, as many within the industry have consistently indicated a preference for the CFTC as their regulator. The CFTC is often perceived as having a more lenient approach to regulations compared to other agencies.
What legal changes can we expect to see under Trump?
Crypto lawyer Robert Nupp told CryptoMoon that the launch of the Trump dynasty’s World Liberty Financial was one the biggest “soft” endorsements of Ethereum, DeFi and real-world crypto projects. It has already purchased millions of dollars worth of ETH, Chainlink (LINK) and Aave (AAVE).
Nupp believes many within crypto are actually underestimating the positive impact of Trump on the industry.
“Right out of the gate, they’re going to be extremely helpful to crypto.”
As stated by Nupp, Trump is employing World Liberty Financial as a symbol to demonstrate to the world his proposed approach towards cryptocurrency should he assume the presidency.
He essentially indicated that, under his leadership, it’s acceptable to continue doing this moving forward.
Additionally, Nupp hinted that the Trump administration would accelerate their approach towards cryptocurrencies, citing Trump’s strong relationship with Elon Musk and the designation of David Sacks as a ‘Crypto and AI Czar’ as indicators of the swift pace they are expected to maintain.
“It’s going to be a blitzkrieg.”
ETH staking yields could come to ETFs
SEC Commissioner Peirce has indicated a possible reconsideration of previous decisions that prohibited in-kind redemptions for crypto ETFs, as well as the inclusion of staking options for Ethereum ETFs.
As a crypto investor, I can say that the shift from a majority of commissioners being against approvals to a majority in favor makes the process smoother and more likely for things to move forward.
The entities responsible for creating Exchange-Traded Funds (ETFs), such as Fidelity, 21Shares, and Franklin Templeton, have all asked for the inclusion of staking, which at present offers around a 3.1% return annually, as reported by Staking Rewards.
According to Bernstein, it’s expected that under a potential revamped SEC led by Trump 2.0, the staking yield for ETH may be given approval. He further speculates that increased activity on Ethereum’s network could potentially boost rewards to around 4%-5%.
In simpler terms, if an Exchange Traded Fund (ETF) provides inherent returns, it’s not hard to understand why this could be advantageous for the underlying asset, especially given that the U.S. Federal Reserve might lower interest rates even more in 2025.
In a situation where interest rates are falling, the potential yield from Ethereum (ETH) could be particularly appealing. Additionally, the yield aspect within Ethereum Exchange Traded Funds (ETFs) would provide some room for asset managers, according to Bernstein. This setup could enhance the economic case for ETH and serve as additional motivators to encourage institutional investors to consider ETH ETFs.
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2024-12-27 18:38