QUICK TAKE

• As two people with a combined 14 years in crypto, it’s pretty unbelievable that crypto has become such a hot topic in political discourse.
• This column is adapted from The Scoop newsletter.

This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group.

Since President Joe Biden’s poor debate performance at the end of last month raised concerns about his age and cognitive ability, the Democratic party has been in a panic. Meanwhile, former President Donald Trump has seen his odds of winning the presidency surge across betting markets.

Given Trump’s alignment with the technology, you’d think this would be good news for crypto markets. In his official platform released Monday, he stated he would halt the so-called crypto “crackdown.”

Here’s the relevant passage from the platform:

“Republicans will end Democrats’ unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency. We will defend the right to mine Bitcoin  BTC -0.19%

, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control.”

That’s a major pivot from the Biden administration, under which U.S. Securities and Exchange Commission head Gary Gensler has sought to restrict Americans’ ability to engage in self-custody and participate in decentralized finance. Gensler has also taken legal action against many players whom industry participants have long viewed as the only good actors, such as Uniswap, Coinbase and Kraken.

This isn’t the first time Trump has supported crypto. At an event in San Francisco in June, he even called himself the “crypto president.”

As two people with a combined 14 years in crypto, it’s pretty unbelievable that crypto has become such a hot topic in political discourse. Even asset management firm Bernstein is describing crypto as part of the so-called “Trump Trade,” referring to assets that might benefit under a potential Trump administration.

Here’s Bernstein:

“The Republican side sees crypto not just as a vote bank but also a meaningful source of funding. If the election sentiment shifts more Republican, crypto would end up as the primary ‘Trump trade’ and hopes of a favorable regulatory regime would change the ‘use-case’ narrative around blockchains.”

Readers might recall the original “Trump Trade” back in 2016. Some of our more “degen” friends in the crypto markets have even dubbed it the “Donald Pump.”

Where’s the DJ Pump?

So given the current backdrop of Trump surging in the polls and on Polymarket, where’s the pump?

Bitcoin is down more than 6% since the debate that many viewed as the death knell of President Biden’s campaign.

While the potential of a Trump presidency is bullish for crypto, there’s still too much uncertainty for crypto markets—already the riskiest of markets—to rally. For one, it’s now unclear if President Biden would remain in office given potential issues with his cognitive abilities. What’s more uncertain than that? Then there’s the German bitcoin.

The German government has transferred thousands of bitcoins to Bitstamp, Coinbase, Kraken and several market-making firms in recent weeks. Our capital markets are improving, but order sizes like that are tough for crypto to absorb, and even the most eager bulls are hesitant to bid against such large volumes. Das size.

QCP says we need a catalyst to get things going again. A strong debut in the launch of spot Ethereum ETFs could be one such catalyst, with a strong reception “boosting liquidity and potentially surprising the market with an upside move.” There’s been a wave of ETF issuers, VanEck, BlackRock and Fidelity, among others, that have amended their S-1 registration statements this week for their spot Ethereum ETFs, potentially signaling that they could start trading soon. Additionally, the upcoming U.S. CPI and PPI reports, set for release on Wednesday and Thursday, could add to market volatility.

Still, the sentiment absolutely sucks right now. However, some believe if Trump wins in November, the market could rebound and enter a massive bull cycle. Derivatives markets reflect this temporary pessimism, with an inverted term structure showing short-dated options trading at higher implied volatility than longer ones, indicating overextended bearishness.

The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter, which hits inboxes on Tuesday and Friday mornings.