$XRP Continued Upside Ahead Amid Favorable Policy Backdrop
2025-01-17
Category: None

Trump's inauguration is a few days away, and there's no shortage of speculation as to what this could mean for crypto. Sharing a few of my current thoughts below on potential policies, and what cryptocurrency attributes are most likely to benefit from this cycle.  

There's been a lot of talk of strategic reserves, but it seems likely priced in and/or overhyped. One executive order that seems to be in Trump's authority would be to overturn a key SEC policy that restricts banks from holding custody of Bitcoin and digital assets.

Well what would banks want in a cryptocurrency? 1) Liquidity, high trading volumes and market stability, 2) Security, assets with established custody solutions, 3) Speed

Not going to happen Day 1, but Trump pursuing some type of capital tax exemption seems very likely. The full exemption on crypto capital gains does not seem realistic to pass through congress, but exemptions on certain types of crypto transactions, particularly small transactions, seems like something that's plausible. This could potentially be a middle ground of some sort; a concession that middle of the pack politicians are willing to make.

Limiting exemptions to small transactions would presumably be more palatable for the IRS, less of a dent into potential tax revenues, and would reduce some of the insane headaches from all the micro transactions. As we know, capital gains tax is the single largest impediment to cryptocurrency being used as an actual currency, as every transaction is a taxable event. If that constraint is removed for certain types of transactions, then it could indeed be easily used as a currency. I.e. no taxes when you pay for a coffee.

What do people / vendors want in a crypto-currency? 1) Low cost, cheap fees, 2) Speed, ability to transact quickly and efficiently (seconds.. not minutes, not hours)

There's a lot more to say here, but the conclusion in many regards is something that the market has already recognized; the potential value of a cryptocurrency that's 1) highly liquid, 2) secure, 3) cheap to transact, and 4) fast.

Donald Trump has vocalized his support of "Made in the U.S." crypto, so the most promising cryptocurrencies will also likely be those that are U.S. based, registered or have significant ties to the U.S.

If I had to guess, the Trump administration and federal government will also have preferential treatment of crypto with centralized networks, or crypto that is heavily reliant on a single group and/or the original founders. (Note this is irrelevant for the likes of  CRYPTOCAP:BTC , due to its sheer market dominance, but also because Trump's intent is for the U.S. to be a global leader in BTC mining). I.e. if you can't govern it, then produce it and/or control the supply. 

With all that said, it's easy to understand why Ripple ( BITSTAMP:XRPUSD ) has seen the gains that it has. Tough to say how much of this is already priced in the immediate term, and how things will play out next week, but the long-term prospects for  CRYPTOCAP:XRP  under a Trump administration are still very much there.

Overall, my thesis is that cryptocurrencies with the following attributes seem most likely to benefit from this cycle; 1) highly liquid, large trading volumes, 2) fast transaction speeds, 3) cheap to transact, 4) significant ties to the U.S., 5) centralized governance or reliance on founders.

Would be curious to hear from others. What cryptocurrencies or attributes do you believe will benefit most under a Trump administration, and why?

 BITSTAMP:XRPUSD   COINBASE:SOLUSD   COINBASE:DOGEUSD   COINBASE:XLMUSD  Stablecoins. DeFi.