Investors have been speculating for months about the impact of the U.S. presidential election on crypto markets, and the value of both crypto and crypto-related stocks soared on Wednesday as results were finalized. Bitcoin (BTC 5.45%) had the biggest symbolic move, climbing 8.5% in the past 24 hours as of 10 a.m. ET, but some stocks made bigger moves.
Shares of Robinhood Markets (HOOD 15.95%) jumped as much as 12.2% in early trading, Coinbase Global (COIN 22.57%) was up a whopping 20.1%, and MicroStrategy (MSTR 10.85%) was up 14.7%. Shares are up 8.6%, 15.3%, and 10.4% respectively as I’m writing around 10:30 a.m.
Bitcoin’s big bounce
The move in MicroStrategy is correlated directly to Bitcoin given the company’s leveraged position in the token. And CEO Michael Saylor has said he wants to continue buying Bitcoin with the company’s balance sheet, so a continued move higher for Bitcoin would be good for the company.
Robinhood and Coinbase would benefit more indirectly from increased crypto trading on their platforms. Coinbase has seen a surge in trading volume on the Coinbase exchange over the past 24 hours to $6.1 billion from a typical range of between $1 billion and $2 billion per day. Higher volume and volatility will ultimately drive Coinbase’s exchange business, which still accounts for most of its revenue.
Robinhood could also get a boost from trading given the 33% drop in crypto trading volume in the third quarter of 2024. Crypto only accounts for about $20 billion of the $152 billion the company has under custody, but if it’s a growth business, it will help revenue and the bottom line.
Regulatory clarity ahead?
The bigger upside would be potential regulatory clarity for crypto from a combination of new laws passed by Congress and more friendly regulators, particularly at the Securities and Exchange Commission (SEC). The SEC has gone after most crypto companies and token creators in the past few years with little success in court, but it’s caused a freeze of development and innovation in the U.S. Clarity around what’s legal and what isn’t would be welcome for everyone in the industry and investors are hoping Donald Trump in the White House will lead to this clarity.
Exactly what clarity could result in is uncertain, but companies like Coinbase have been building infrastructure tools like the Base blockchain, smart wallets, and a developer platform for others to build on top of. If financial transactions or asset ownership records move to the blockchain, it could unlock massive growth potential for the company on top of higher trading.
Will the pop in crypto last?
While euphoria is taking hold of the market, there’s a lot of uncertainty ahead for crypto overall. It’s true that a change in regulators and an unleashing of innovation could make crypto and the blockchain more mainstream.
But that doesn’t mean that value would flow to companies evenly. A lot of the innovation over the past few years has been with stablecoins, not Bitcoin or altcoins, which may mean less trading of tokens long-term. We may also see new start-ups take share if they’re built with new crypto rules in mind.
I’m bullish on the blockchain long-term, but these short-term moves can often be overdone and the seemingly obvious impact of an election may not play out. That’s why I’m not buying the pop, but watching to see what fundamental changes are coming in the next few months.
Travis Hoium has positions in Coinbase Global and Robinhood Markets. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.