Trump to bring crypto-friendly administration and new state policies with inauguration
The upcoming presidential administration of Donald Trump and the rising presence of cryptocurrency in statehouses could push states towards embracing the digital currency. Advocates of cryptocurrency view it as a valuable hedge against inflation, comparable to gold. There is a belief among bitcoin enthusiasts and investors that traditional government currencies are susceptible to devaluation and that greater government involvement would stabilize future price fluctuations, providing increased legitimacy and further driving up prices.
However, the risks associated with cryptocurrency investments should not be underestimated. Critics assert that investing in cryptocurrency is highly speculative, as predicting future returns remains an area of uncertainty. Individuals entering this market should prepare themselves for the possibility of financial losses.
Despite the growing interest in cryptocurrency, only a small number of public pension funds have invested in it. A study by the U.S. Government Accountability Office highlighted the exceptionally high volatility associated with cryptocurrency. The report also noted the absence of a standardized method for projecting future returns in this market.
The year 2024 marked significant milestones for cryptocurrency, with bitcoin surpassing $100,000 and the approval of the first exchange-traded funds holding bitcoin by the U.S. Securities and Exchange Commission. With President Trump’s commitment to positioning the United States as a dominant force in the world of cryptocurrency, enthusiasts are optimistic about the future of digital currency.
Legislative efforts to make states more cryptocurrency-friendly are expected to increase. A powerful lobby is emerging in support of cryptocurrency, with bitcoin miners establishing new facilities and venture capitalists funding tech companies focused on cryptocurrency. Following the introduction of a bill in Pennsylvania that sought to authorize the state treasurer and public pension funds to invest in bitcoin, similar legislation is anticipated in other states.
Despite these developments, Keith Brainard, the research director for the National Association of State Retirement Administrators, believes that many public pension fund investment professionals may be hesitant to include cryptocurrency in their portfolios. Due to its relatively short track record and uncertain place within asset classes, the risk posed by cryptocurrency investments might not align with the risk-to-reward ratio sought by pension fund professionals.
While some states have already made investments in cryptocurrency, such as Wisconsin and Michigan, pension boards have been slow to adopt bitcoin. The approval of exchange-traded funds by the U.S. Securities and Exchange Commission in 2024 has provided pension boards with valuable investment options. Asset managers like BlackRock, Invesco, and Fidelity have also entered the bitcoin ETF market, catering to the growing interest in digital currency investments.
