Impact of US Election Results on Crypto and Retail Investors

• Blockchain Council
• November 19, 2024

The 2024 U.S. presidential election left a significant mark on cryptocurrency markets and retail investing trends. The re-election of Donald Trump brought with it a wave of optimism, but also raised concerns about potential hurdles ahead.

Crypto Markets See Unprecedented Growth

Bitcoin’s Record-Breaking Climb

Right after the election, Bitcoin skyrocketed past $90,000, reaching a market value of $1.5 trillion. This massive increase reflected renewed hope among investors expecting more favorable regulations under the new administration.

Other digital currencies joined the upward momentum. Ethereum and Solana gained popularity as confidence surged, while Dogecoin attracted attention for speculative reasons. These trends showcase how digital assets are becoming more mainstream in diverse sectors.

A Mysterious Bitcoin Holder

A notable story in this context involves a Bitcoin investor known only by their blockchain address. Their wealth ballooned to $21 billion as Bitcoin’s price climbed from $59,000 in September to over $84,000 post-election. This case serves as a reminder of how cryptocurrency’s volatile nature can create extraordinary fortunes but comes with considerable risk, especially for newcomers.

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Retail Investors Embrace Market Opportunities

Spike in Stock Trading

Retail investors showed enthusiasm following the election. In just a week, they poured over $9 billion into stocks and exchange-traded funds (ETFs). This was well above the yearly average, with financials, technology, and utilities sectors seeing significant gains.

During election week, major indices like the Dow Jones, S&P 500, and Nasdaq reached record levels, climbing by 4.6%, 4.7%, and 5.7%, respectively. Yet, partial pullbacks in the following week saw declines of 1.2% for the Dow, 2% for the S&P 500, and 3.2% for the Nasdaq. These adjustments reflected some doubt about how sustainable the rally would be.

Crypto ETFs Gain Momentum

Retail investors increasingly added crypto-focused ETFs to their portfolios. Expectations of policies favoring cryptocurrency, such as tax reductions on small transactions and easier compliance measures, further fueled this shift in investment strategies.

Expected Policy Shifts: Crypto and Beyond

A Friendlier Crypto Environment

The crypto community actively supported candidates who promised industry-friendly policies, donating $170 million to campaign efforts. This led to 50 of 58 endorsed candidates winning, setting the stage for regulatory reforms.

Anticipated measures include:

• Expanding the approval of crypto ETFs.
• Shifting oversight from the SEC to the CFTC, seen as a less restrictive regulator.
• Offering tax incentives for smaller crypto transactions.

Challenges still loom, such as ensuring fair access to banking for crypto businesses and addressing concerns about stablecoins.

Broad Deregulation Trends

The administration’s focus extends beyond cryptocurrency. Areas like artificial intelligence, advanced manufacturing, and renewable energy are expected to benefit. Collaborations with tech leaders, including Elon Musk, may drive innovation faster. However, a looser regulatory environment raises potential issues around privacy, misinformation, and financial market vulnerabilities.

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Risks and Concerns in the Market

Cryptocurrency Volatility

Despite the optimism, digital currencies remain unpredictable. Bitcoin’s surge to $90,000 has captured attention, but steep declines could quickly wipe out inexperienced investors’ gains.

High Stock Valuations

Stocks have reached historically high price-to-earnings ratios, leading some analysts to predict an impending correction. Tariffs, immigration policies, and national debt levels add further uncertainty to market conditions.

Economic Fragility

The U.S. economy faces challenges tied to deregulation and reliance on monetary policies. High debt levels and unresolved trade issues, particularly with China, could lead to instability. Short-term gains from increased productivity and mergers might be masking deeper structural issues that could impact long-term growth.

Global Ripple Effects

Changes in Foreign Investment

The election’s outcome influenced markets beyond U.S. borders. Foreign Portfolio Investors (FPIs) withdrew large sums from Indian equities in October, marking the highest outflows in ten months. This shift reflects global funds gravitating toward the perceived growth potential of U.S. markets.

Stronger Dollar Impacts Trade

A stronger dollar following the election benefited American consumers by lowering the cost of imports. However, it also made U.S. goods pricier for international buyers, which could affect trade balances over time.

Retail Platforms Adapt

Robinhood’s Global Ambitions

Robinhood, a major platform for retail investors, is expanding its crypto services to the UK. CEO Vlad Tenev aims to transform the company into a comprehensive financial hub, offering tools such as crypto trading, retirement planning, and AI-driven financial advice.

Despite facing criticism over its revenue model and controversies like the GameStop saga, Robinhood reported profits of $495 million in the first nine months of the year. The platform’s strategy includes targeting younger generations inheriting wealth from baby boomers, ensuring its growth in the retail finance space.

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Strategies for Investors

Diversify to Reduce Risk

Spreading investments across different types of assets—like stocks, bonds, and cryptocurrencies—can help cushion against market swings.

Stay Updated

Following policy announcements and regulatory developments is essential. Changes in crypto rules, tax policies, or Federal Reserve actions can significantly impact investment choices.

Focus on Long-Term Goals

While chasing quick returns might be tempting, long-term strategies often prove more effective. Establishing clear financial goals and maintaining discipline can lead to sustainable growth.

Closing Thoughts

The 2024 U.S. presidential election has brought about notable changes in the financial world, especially within cryptocurrency and retail investing. Bitcoin’s sharp rise, increased participation from retail investors, and expectations of deregulation signal a period of opportunity and uncertainty.

By staying informed, diversifying investments, and prioritizing long-term goals, investors can navigate these evolving markets while mitigating risks. The balance between cautious optimism and calculated action will be key to success in this dynamic environment.