The cryptocurrency market is experiencing a resurgence. The value of Bitcoin surpassed the $100,000 mark — an increase exceeding 40% since the election of Donald Trump. This escalation is linked to expectations that Trump’s administration might relax regulations and create a more crypto-friendly policy environment. While some view this development as a progression toward transparency and expansion, others criticize it as an unwarranted government overreach.
This week, the Trump administration appointed former PayPal chief operating officer David Sacks as the “White House A.I. & Crypto Czar.” Recognized as an early proponent of cryptocurrencies, Sacks has championed blockchain technology and the promotion of digital assets, in contrast to the enforcement-focused approach of the Biden administration.
USC specialists are available for discussions regarding cryptocurrency, Bitcoin, and regulation.
Contact: Will Kwong at [email protected]; USC News at [email protected] or (213) 740-2215.
Potential shifts in cryptocurrency regulation under Trump’s return: Anticipations
“If cryptocurrency is utilized to bypass regulations or taxes, it will forfeit its comparative edge over more conventional financial offerings. Consequently, cryptocurrencies will need to compete based on efficiency, speed, and cost,” states Michael Simkovic, professor of law and accounting at USC Gould School of Law.
“The new administration might dismiss Gary Gensler from the SEC, who has initiated legal actions against crypto companies for purported violations of securities statutes. A Republican-led administration would likely be less enthusiastic about regulating crypto, except in instances related to national security.”
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Grasping cryptocurrency’s instability: Key influences
“Cryptocurrencies are referred to as money, yet they lack the conventional attributes associated with currency. Rather, the majority of cryptocurrencies (with asset-backed exceptions) resemble collectibles with minimal intrinsic worth. Their value is derived from their scarcity and from collective beliefs that they will maintain value in the future,” explains Larry Harris, the finance chair at USC Marshall.
“Such beliefs are remarkably volatile, which results in significant cryptocurrency price fluctuations. Investors whose returns depend on the actions of other investors will face disappointment when new investors do not appear or current investors lose interest.”
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Distinguishing cryptocurrency from Bitcoin
“The terms crypto and Bitcoin should be differentiated when examining this sector. Bitcoin represents the culmination of decades of research in computer science and applied cryptography aimed at creating decentralized electronic currency. Other cryptocurrencies, distinct from Bitcoin, can be categorized as technological endeavors, and in my view, supported by empirical research, only Bitcoin qualifies as its own global macroeconomic asset class,” asserts Nik Bhatia, adjunct professor of finance and business economics and founder of The Bitcoin Layer research organization.
“The ascent of Bitcoin over the last 15 years stems from a unique innovation that cannot be replicated: decentralized electronic cash. In many respects, the description of “digital gold” aptly encapsulates this digital asset that possesses an algorithmically restricted supply function. If Bitcoin (currently valued at less than $2 trillion) were to attain the market capitalization of gold ($17 trillion), it would imply a price of roughly $800,000 for one BTC. Bitcoin stands as the most volatile major asset class to have ever existed, showcasing extreme cyclicality with substantial bull-market surges every four years on average.”
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The forthcoming advancements in Bitcoin technology
“The blockchain technology underpinning Bitcoin has also given rise to numerous other cryptocurrencies and fintech initiatives. Regulatory frameworks are still adapting to the technological implementations present in these projects, which often emphasize privacy and anonymity,” indicates Nitin Vasant Kale, professor of technology and applied computing practice at USC Viterbi School of Engineering.
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