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⚡Bitcoin's Political Makeover👮

Croxroad

26 Feb 2024 — 4 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

♟️ Trump's Bitcoin Neutrality

In recent times, Bitcoin enthusiasts have successfully convinced influential figures in the tech and finance sectors, including Elon Musk, Jack Dorsey, Larry Fink, and Ray Dalio, to embrace the cryptocurrency. Their latest target? Public leaders. However, their biggest challenge lies in winning over one of their staunchest sceptics: former President Donald Trump.

While Trump has historically been critical of Bitcoin, his stance took an unexpected turn during a televised town hall in South Carolina. When asked about supporting Bitcoin as an alternative to a central bank digital currency, Trump shifted gears and praised the cryptocurrency. He acknowledged its growing popularity and stated he could accept it as a coexisting currency with the U.S. dollar, though he emphasised his continued support for the dollar's dominance.

This shift is remarkable considering Trump's previous disdain for cryptocurrencies. In 2019, he publicly expressed his dislike for Bitcoin and other digital assets, dismissing them as not real money and based on thin air. Even post-presidency in 2021, he called Bitcoin a scam, citing competition against the dollar.

However, signs of change began to emerge in 2023 when Trump engaged with NFTs, raising campaign funds through Ethereum and launching a collection on the Polygon blockchain. His evolution continued as he opposed the creation of a central bank digital currency (CBDC) earlier this year, aligning with pro-Bitcoin viewpoints.

The recent town hall marked a significant moment as Trump, while still favouring the dollar, acknowledged Bitcoin's independent existence. This shift in sentiment, from negative to neutral, prompts the question: why?

The likely answer is a strategic political move. Trump seems to recognize the growing influence of the cryptocurrency community, especially among the younger demographic. With 52 million Americans owning digital assets, Trump's pivot to a neutral position on Bitcoin is seen as an attempt to appeal to the expanding crypto voter base.

In contrast to the 2020 election, where crypto investing was niche, this voting bloc is now substantial, primarily comprising young voters, many of whom lean Democrat. Trump's neutral stance is positioned as an alternative to President Joe Biden's more critical approach to crypto, aiming to attract voters who might otherwise support Biden.

By adopting a Switzerland-like approach to Bitcoin, Trump is positioning himself favourably against Biden, who has shown a less crypto-friendly stance through figures like Senator Elizabeth Warren and SEC Chair Gary Gensler. For Trump, making peace with Bitcoin is a calculated strategy to gain votes from the crypto community, a move that will be put to the test in the upcoming November elections.

🐿️ Riot's Rocky Road

Bitcoin mining company Riot Platforms is navigating several challenges that could impact its financial performance, according to its latest annual report. The ongoing global chip shortage poses a significant risk, affecting Riot's ability to acquire the specialised ASIC chips crucial for its mining operations. Despite securing a substantial order of miners in December, the company anticipates higher-than-usual costs until the chip crisis is resolved. Additionally, Riot faces challenges in adapting its miners to unique cooling environments, potential design flaws, and the need for constant growth in hash rate to stay competitive in the dynamic industry.

Furthermore, Riot highlights concerns about Bitcoin itself, acknowledging scaling obstacles and the possibility of decreased demand for the cryptocurrency. If the demand for Bitcoin stagnates or declines, it could negatively impact its price, thus affecting Riot's financial position. Moreover, an increasingly pro-climate change agenda in Texas and the United States governments introduces regulatory risks. Riot acknowledges that new legislation and increased regulations related to climate change could impose significant costs, impacting energy requirements and compliance expenses, potentially leading to a loss of competitive advantage if subject to stricter regulations compared to peers in other regions. Despite these challenges, Riot Platforms has witnessed an increase in Bitcoin production but remains cautious about potential risks to its profitability and financial stability.

🚖 Tax Harvesting

In the realm of cryptocurrency, tax harvesting operates under a different set of rules compared to traditional investment assets, as the standard regulations regarding wash sales don't currently extend to the crypto market. This unique feature becomes advantageous for tax loss harvesting due to the inherent volatility of the cryptocurrency market. Essentially, investors can strategically sell their crypto assets at a loss and quickly repurchase them without the usual constraints. However, opting for an indirect investment route through an Exchange-Traded Fund (ETF) may limit this tax advantage, as the automatic nature of ETF investments may restrict the flexibility to capitalise on the market's volatility for tax purposes.