December 19, 2024

Welcome to Factor6’s new Proof of Steak blog—where we sink our teeth into the juiciest developments in digital assets and tech. We’ll serve up a mix of insights, analysis, and our strategies for navigating the markets. So, grab a seat and dive in.

We all remember how central stock market prices were to President Trump during his previous term, often quoting the markets daily as a measure of his success. Now, the price of Bitcoin has become the new barometer, and it’s clearly top-of-mind for him even after the election—suggesting his embrace of crypto goes far beyond mere vote-winning tactics. We’re already seeing this agenda take shape in real-time as Trump assembles the crypto version of “The Avengers.”

In our first edition, we’ll explore why the incoming administration—vis-à-vis Trump’s Cabinet and staff nominations—represents one of the most bullish developments in Web 3.0 and why this team is positioned to propel the industry forward.

SEC: Chair Gary Gensler out, Paul Atkins in.

Why It Matters: The departure of Gary Gensler resolves a monumental overhang for the industry, and yet the industry has been granted a near-best case scenario with Paul Atkins’ nomination, given his polar-opposite approach to crypto.  Atkins’ work at consultancy firm Patomak Global Partners has touched on digital assets, and he co-chaired Token Alliance where he pushed for best practices in token issuances and trading.

Atkins’ history as an SEC Commissioner is another bullish signal: he hired current Commissioners Hester Peirce and Mark Uyeda, both of whom are strong crypto advocates. With Atkins at the helm, expect more genuine engagement between the industry and the Commission, ending Gensler’s disingenuous “come in and register” rhetoric.  The approval of more ETFs – potentially including Solana, Ripple, and even Dogecoin – seems increasingly inevitable.  We’d expect a more lenient and deferential SEC, ending the “regulation-by-enforcement” regime, and instead leaning on safe-harbors and no-action letters while Congress works to pass legislation, perhaps first materializing in a potential repeal of SAB121—a guideline which restricted banks from transacting in digital assets.  Lastly, recent media reports have suggested Democratic Commissioner and crypto-skeptic Caroline Crenshaw may not be renominated, potentially clearing further roadblocks.

Treasury Dept: Scott Bessent

Why It Matters:  As a macro hedge fund manager, Scott Bessent “gets it”—he has a deep understanding of markets and economics, and he takes a tempered approach to tariffs. Bessent’s pro-growth, pro-crypto stance includes support for a strategic Bitcoin reserve, noting that he’s been “excited about the President’s embrace of crypto” adding that “crypto is about freedom” and that “the crypto economy is here to stay”.

We’re impressed by his appreciation for younger generations who represent the largest crypto holder base, when he says: “One of the most exciting things about Bitcoin is that it brings in young people and those who have not participated in markets before. Cultivating a market culture in the US, where people believe in a system that works for them, is the centerpiece of capitalism.”

That said, Bessent’s focus on reducing government spending could present a headwind for Bitcoin and other hard assets that often thrive during fiscal expansion. This nuanced stance underscores the balancing act between digital asset growth and fiscal discipline in his tenure.

“White House A.I. and Crypto Czar”: David Sacks

Why It Matters: A tech entrepreneur and VC with deep crypto ties (a general partner of a VC firm that has made crypto-related investments, while being an investor himself in crypto funds), Sacks is uniquely positioned to bridge the gap between Washington and Web3. His investments span blockchain projects, and his role will likely focus on crafting a legal framework that allows the crypto industry to thrive in the U.S.  Sacks’ understanding of Bitcoin, Ethereum, Solana, and the broader disruptive potential of blockchain technology aligns well with the administration’s goals.

CFTC Chair: Remains fluid, but Brian Quintenz floated along with current CFTC commissioners, Caroline Pham and Summer Mersinger.

Why It Matters: A former CFTC commissioner and now Chief Policy Officer at a16z, Quintenz is a known advocate for digital assets. He played a role in launching the first regulated BTC and ETH futures contracts in the U.S. His appointment would bring a pragmatic approach to developing a comprehensive regulatory framework for crypto, fostering market stability and deeper integration with traditional finance.

FDIC Chair: Martin Gruenberg Steps Down

Why It Matters:  Gruenberg’s departure would mark the end of Operation Chokepoint 2.0, a strategy that made it nearly impossible for crypto companies to access banking services. His replacement could mean a more crypto-friendly FDIC, easing the pathway for digital asset firms to establish a supportive financial infrastructure.

Commerce Dept.: Howard Lutnick

Why It Matters:  While not the most impactful agency on digital assets, the Commerce Dept. has often chimed in with regard to developing a regulatory framework through research and public-private engagement.  There is no question, however, that if Cantor Fitzgerald CEO Howard Lutnick is confirmed, that he will have a say in policy.  Cantor is one of the few investment banks who have embraced the industry, most notably for engaging in banking services with stablecoin giant Tether, Bitcoin miners, and other crypto companies.

Dept. of Government Efficiency (DOGE): Elon Musk, Vivek Ramaswamy. Bonus point: Marc Andreesen is reportedly assisting in recruiting talent.

Why It Matters: While not directly involved in digital asset policy, one can’t help but marvel at meme-ability and cultural significance of Dogecoin (and thereby, digital assets).  However, Musk and Ramaswamy’s influence in promoting efficiency and innovation could indirectly benefit the broader Web3 ecosystem. That said, if they’re successful in shrinking the fiscal deficit, it could be a headwind for Bitcoin’s price in the long term.

In sum, it is strikingly clear that Trump is delivering on his word to make digital assets a key part of his agenda.  The creation of a Strategic Bitcoin Reserve presents one of the most significant right-tail (i.e., upside) risks in crypto’s history.  However, the broader digital asset ecosystem stands to benefit immensely from having strong advocates at the highest levels of government.  We can’t help but feel even more bullish about the proliferation of Web3 in the near-, medium-, and long-term.