The evolving attitude of Washington towards cryptocurrencies has been a significant topic of discussion in recent times. Bitwise CIO Matt Hougan believes that the market is underestimating the significance of these political shifts. He highlighted in a memo on June 4 that the US political landscape has changed significantly towards a more positive stance on crypto. If the impact of these changes had been priced in, the market could have already been at a new all-time high. Historically, crypto has been a partisan issue, with Republicans generally supporting it and Democrats showing resistance.
Despite the partisan divide, crypto advocates have strategically built political influence, leading to significant legislative actions. For example, on May 8, 21 House Democrats voted alongside Republicans to repeal SAB 121, a controversial SEC rule. This was followed by the Senate’s support, with 10 Democrats, including Senate Majority Leader Chuck Schumer, joining the GOP in the repeal. This marked a positive legislative action for crypto in US history. Additionally, on May 20, 71 Democrats joined 208 Republicans in passing FIT21, a bill assigning oversight to the crypto-friendly Commodity Futures Trading Commission (CFTC). The SEC also approved filings to list spot Ethereum ETFs, surprising many.
While there have been positive developments, crypto still faces ongoing political challenges. President Joe Biden recently vetoed the repeal of SAB 121, emphasizing the complex regulatory environment. However, Hougan sees these developments as a turning point for crypto. He believes that the broader market has yet to fully recognize the implications of these political shifts. Regulatory uncertainty has long been a primary concern for financial advisors and Wall Street institutions, with 64% of US financial advisors citing it as a barrier to greater crypto exposure in their portfolios.
Hougan argues that once this regulatory barrier is lifted, a significant portion of the estimated $20 trillion managed by financial advisors could flow into crypto. The impact on Wall Street could also be substantial, as major financial institutions have hesitated to fully embrace crypto due to regulatory concerns. If Wall Street were to accept crypto as a mainstream asset, the market could reach new heights. Despite these potential impacts, the broader market remains largely indifferent to these changes, presenting an opportunity for savvy investors to capitalize on the shifting landscape.
The evolving attitude of Washington towards cryptocurrencies is a key factor that could significantly impact the market in the coming years. With legislative actions and increased political support, the potential for crypto to become more mainstream is becoming more evident. While challenges remain, the changing political tides present a unique opportunity for investors and institutions to reevaluate their stance on crypto assets. As the market continues to evolve, staying informed and proactive in response to these changes will be crucial for navigating the future of cryptocurrency investments.
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