WSJ Your Money Briefing - How Softer Crypto Regulations Under Trump Could Impact Bitcoin

Episode Date: November 19, 2024

Bitcoin has added nearly $500 billion to its total value since Election Day. Wall Street Journal columnist James Mackintosh joins host J.R. Whalen to discuss several Trump campaign proposals related to the cryptocurrency, including a potential government stockpile of the virtual coin.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Exchanges. The Goldman Sachs podcast featuring exchanges on rates, inflation, and U.S. recession risk. Exchanges on the market impact of AI. For the sharpest analysis on forces driving the markets and the economy, count on exchanges between the leading minds at Goldman Sachs. New episodes every week. Listen now. Here's your Money Briefing for Tuesday, November 19th. I'm JR Whalen for The Wall Street Journal. Bitcoin has been a big winner among investments this month.

It's now worth about $1.8 trillion, ranking between Google parent Alphabet and Facebook owner Meta. People are very excited about what they're calling the first crypto president. Donald Trump gave a big speech over the summer to a cryptocurrency conference where he came out strongly in favor of cryptocurrencies. He said that he would reduce regulation. So he wants to have regulations made by people who like Bitcoin rather than current administration,

which has been very anti-cryptocurrencies. We'll talk to Wall Street Journal columnist James McIntosh after the break. This podcast is brought to you by CME Group, the world's leading derivatives marketplace, offering the widest range of global benchmark products across all major asset classes. CME Group, where risk meets opportunity. Bitcoin buyers have pushed the price of the cryptocurrency to a series of new records in just the past two weeks.

Wall Street Journal columnist James McIntosh joins me. James, help us with the basics for a moment. What is Bitcoin? So Bitcoin is a cryptocurrency, which means it uses some very interesting and clever maths to secure an online currency, which you can in principle use to transfer between people without the involvement of a government. It's called a virtual currency. How does that differ from the paper currency we have in our wallets? So almost all of the dollar is in fact a virtual currency as well. Really the distinction here is between being government backed. So the dollar is backed by the full faith and credit of the United States, which means in principle the government can dig into your pockets as taxpayers to back the dollar.

Bitcoin isn't backed by any government or indeed by anything. It relies for its value on the fact that other people want it. How do people invest in it? Nowadays you can buy it pretty much anywhere you buy stocks. So most of the retail brokers will sell bitcoin as well. Plus there are ETFs and there are various companies that have built big stocks of it. So their share prices tend to move quite closely with it as well. Can it be used as a form of currency? Yes, but the whole point of it when it was originally designed was to allow it to be used as a currency so that retailers on the internet could sell stuff in the same way

as they sell stuff for a $20 bill. Unfortunately, it's not very good at it, so it's expensive and slow compared with using dollars. What are some other pitfalls of investing in Bitcoin? Well, it's incredibly volatile. So it's been subject to these enormous swings in prices. Obviously, when that's up, that's a good thing for people who own it. When it's down, that's a very bad thing for people who own it.

Why has the price jumped to record levels just since election day? So people are very excited about what they're calling the first crypto president. Donald Trump gave a big speech over the summer to a cryptocurrency conference where he came out strongly in favor of cryptocurrencies. There's two big things. The first is he said that he would reduce regulation. So he wants to have regulations made by people who like Bitcoin rather than the current administration, which has been very anti-cryptocurrencies in much of its regulation.

So people are very excited about the idea of easier regulations on cryptocurrencies. Plus, he said he wanted to create this stockpile of Bitcoin owned by the government. If the government were to come out and start buying Bitcoin, obviously the price would go up a lot. If that were to happen, if the government were to stockpile Bitcoin, how could that impact the US dollar and the economy? Well, I don't think it would do anything to help the US dollar because the dollar's already got backing. If all that happens is that this stockpile is has already got backing. If all that happens is that this stockpile is the existing Bitcoin that have been seized by various law enforcement agencies and they just go into a pile and

aren't sold, then it doesn't do anything at all. It's neither here nor there really for the dollar. Maybe it's marginally good for Bitcoin that the US government won't be selling the Bitcoin that it's got, but it's not a game changer. If the US were to start going out and buying Bitcoin, again it depends how they do it, if people are taxed in order to buy Bitcoin I think there would be uproar. On the other hand, if the government were to go out and borrow a load of money in order to buy Bitcoin, or print a load of money via the Fed in order to buy Bitcoin. That would have quite dramatic economic impacts, both of which would probably be quite bad for the dollar, but

would be very good for Bitcoin. How would that factor into the idea that some people believe that their Bitcoin investment could be a hedge against inflation? Well, it hasn't been a very good hedge against inflation in the past, so it doesn't tend to move closely with inflation, doesn't tend to move closely with expectations of inflation, or with other things that are good hedges against inflation. I think the bigger picture is that the people who talk about it as a hedge against inflation tend to think of it as, well, I want to protect my savings

for the next 30 years against inflation. And they worry that the dollar is going to be inflated away. How do cryptocurrencies in general differ from stocks in terms of why they move up and down in value? There are, let's say, lots of different interpretations here, but one way to think about it is that they're in the short term quite similar. They're both driven by how interested people are in buying them. They're driven by supply and demand in the short run. But in the long run, stocks are driven by their fundamentals. How profitable is the business? How well run is

it? What's the growth in profits in the future? So in that sense, it's speculative and always will be. You wrote that looser regulations might not benefit Bitcoin as much as it would other cryptocurrencies. Why not? Well, at the moment Bitcoin actually is regulated with legal action, but there are Bitcoin ETFs already. The SEC eventually allowed those. Bitcoin is treated as a commodity, not treated like a stock. So if you ease the regulations, the ones that are going to do well are the ones that currently are very restricted by regulation. There's a vast number of cryptocurrencies

out there, but the cryptocurrencies that are currently treated more like stocks, it's very hard to sell those in the US because you're supposed to issue a prospectus and that's just unrealistic for a cryptocurrency. In terms of other forms of crypto, we've been hearing a lot about Dogecoin, often promoted by Elon Musk. Can that be used as a currency like Bitcoin? In principle, it's a cryptocurrency in the same way. It's a joke. The thing was created as a joke, which is probably why it appeals to Elon Musk. He obviously has applied his own

unique sense of humour to the naming of the Department of Government Efficiency, which has the initials DOGE. But it doesn't have one of the key features that Bitcoin has, which is that its supply is limited. So whilst there's been a lot of it created since it was invented, ultimately there's a cap on how much will ever be issued and that's not the case for Dogecoin. So there's an unlimited supply of that. What could an easing of regulations mean overall for cryptocurrency prices? Well it ought to be good. So cryptocurrencies it means that it'll be easier for them to be marketed, it'll be easier for them to be launched, it'll be easier for them to be listed on US exchanges, not stock

exchanges, I should be clear here, but cryptocurrency exchanges. And if all of that's possible, that makes it easier to sell it to people. That's WSJ columnist James McIntosh. And that's it for your Money Briefing. This episode was produced by me, J.R. Whalen, with supervising producer Melanie Roy. Thanks for listening.