CRYPTO FUTURE IS NEAR

The 2024 presidential election in the US has solidified the role of cryptocurrency in politics. It is becoming a powerful factor influencing electoral decisions, one that cannot be ignored, even if one wanted to.

Crypto Voters, or PolitiFi

First, cryptocurrency companies have contributed a significant share of political donations. Second, as revealed by a recent Gemini survey (a trust company regulated by the New York State Department of Financial Services), over one-fifth of Americans own cryptocurrency. This has effectively created a new group of voters deeply concerned with issues related to 'crypto'—referred to as crypto voters. According to surveys by ConsenSys and HarrisX, 92% of cryptocurrency owners planned to exercise their right to vote in 2024. It is evident that their preferences will align with candidates who support transparent and fair regulation of digital currencies. For instance, 62% of young voters (aged 18 to 34) are more likely to support candidates who favour cryptocurrency-friendly policies (DCG survey). Cryptocurrency owners are predominantly young, male, urban dwellers, and more racially diverse than the average voter base (HarrisX poll). They appear to view decentralised finance (DeFi) and blockchain as alternatives to traditional financial systems, which are increasingly losing credibility.

Third, the political landscape has recently been energised by the rise of political memecoins, or PolitiFi coins (PolitiFi), which often carry a humorous or satirical tone. These cryptocurrency tokens gain popularity through internet memes and viral marketing. Essentially, they represent an attempt to capitalise on public opinion, social media trends, or election outcomes. Speculative tokens tied to political figures, elections, beliefs, or events are launched on blockchains like Ethereum and Solana. Some coins, such as TRUMP, MELANIA, and MAGA, have quickly reached market capitalisations of billions of dollars, reflecting support for specific candidates. Additionally, many believe that memecoins make political campaign donations more transparent and accessible for smaller donors. For example, if someone dislikes Trump or doubts his capabilities, they are unlikely to purchase his memecoins.

What is also intriguing is that, according to an NFT Evening poll, PolitiFi is becoming the first introduction to cryptocurrency for many individuals.

On the other hand, the virality of memecoins could serve as a valuable indicator for those seeking to understand trends in public sentiment. The chief investment officer of venture capital firm Maelstrom and co-founder of cryptocurrency exchange BitMEX noted that political memecoins will accelerate the global adoption of cryptocurrencies and bypass 'the censorship of traditional media.' According to the businessman, numerous personal brands created through memecoins will emerge in the US by 2026, surpassing traditional advertising platforms. Experts also highlight that blockchain-based prediction markets (such as Polymarket and Augur) provide insights into public opinion on political outcomes.

Risk of Manipulation and Bribery

Thanks to financial incentives, investors are wagering hundreds of millions of dollars in cryptocurrency on the outcomes of specific events. This represents a direct interest, complete with both benefits and risks, including the potential for manipulation.

As Ethereum co-founder Vitalik Buterin pointed out, tokens launched by politicians are 'a tool for political bribery, including by foreign countries.' They also pose risks to political reputations. For instance, the LIBRA token promoted by Argentine President Javier Milei reached a capitalisation of $4.56 billion on February 14 but collapsed by 94% within hours. This resulted in $292.4 million in investor losses, leading to accusations of fraud against Milei. Jonathan Baldivieso, an attorney and one of the plaintiffs, stated that there was an episode of unlawful association involving fraud, where the president's actions were pivotal. The LIBRA coin could be obtained through a link directing users to a website called vivalalibertadproject.com, referencing Milei's favourite phrase. The president deleted the post hours later, causing the currency's value to plummet and resulting in significant losses for short-term investors.

Prosecutors believe Milei was involved in what is known as a 'rug pull' operation, where a developer launches a token and abandons it after inflating its value, rendering the tokens worthless. Similarly, the Central African Republic's memecoin CAR fell 96% from its peak of $0.89 within a day of its launch. The token was promoted on the social media account of the Central African Republic's President, Faustin-Archange Touadera. Approximately 66% of CAR memecoin investors suffered losses. Additionally, over 810,000 investors who bought into US President Donald Trump's cryptocurrency, $Trump, lost more than $2 billion after the token's price collapsed. Meanwhile, the Trump family and their partners reportedly earned nearly $100 million in trading fees.

Notably, during his previous term, Trump was highly critical of cryptocurrencies, describing them as 'based on air' and facilitators of illegal underground markets. However, last year, the newly elected president began shifting his stance, even promising to make the US the 'cryptocurrency capital of the world.' He also became the first major politician to embrace memecoins. Behind these statements may lie the realisation that doubts about the dollar are driving up the prices of gold and bitcoin (the 'digital gold' scenario). This intersection between politics and cryptocurrency is perhaps the most significant development.

The co-founder and CEO of the Stacks platform stated that bitcoin will continue to attract substantial capital inflows and that its value will never fall below $50,000 again. Meanwhile, Coinbase CEO Brian Armstrong predicts that within five years, up to 10% of the world's GDP will be based on cryptocurrency. Currently, bitcoin is viewed as a highly volatile asset, with its fixed supply seen as a limitation for effective monetary policy management. Additionally, the cryptocurrency market lacks the depth and liquidity required for large-scale transactions.

On the other hand, comparisons between bitcoin and gold reveal many similarities. Bitcoin's supply is limited, much like gold reserves. It can be used as a means of payment, a store of value, a gift, or even lent out to earn interest.

However, the founder and chief investment officer of Cyber Capital warned his followers on social media platform X against investing in bitcoin, citing the blocking of any future increases in bitcoin capacity, contrary to initial plans.

Meanwhile, Trump signed an executive order in January to regulate the crypto market and explore the creation of a cryptocurrency reserve. Additionally, the US Securities and Exchange Commission announced the formation of a cybersecurity and emerging technologies unit to combat cyber misconduct and protect retail investors from unscrupulous players in the new technology space. It is widely believed that clear rules must be established to give token holders a transparent understanding of their rights and revenue sources.

An important issue is the security of cryptocurrencies. Currently, obtaining a private key is enough to steal tokens—transferring them to others without a trace. For example, on February 21, the largest theft in the history of the crypto industry occurred when hackers stole nearly $1.5 billion worth of ether from the centralised exchange Bybit. The North Korean hacker group Lazarus is suspected to be behind the attack. Following Bybit's acknowledgment of the loss, the price of bitcoin, the world's leading cryptocurrency, plummeted.

There are warnings that government interference in the 'life' of cryptocurrencies could lead to unpredictable outcomes. It could be said that the active merging of cryptocurrency with politics will either provide new momentum or reshape it into something entirely different.