Analysts at Wall Street investment bank Jefferies believe that former President Donald Trump’s “overt support” for Bitcoin and crypto, combined with expected higher inflation, larger budget deficits and political pressure on the Federal Reserve, will undermine the US dollar’s dominance as store of wealth.
The analysts said in a research report shared on social media on July 19 that such an environment would be very favorable for crypto-related stocks and gold miners. The phenomenon is already playing a role in crypto stocks and the broader market as it recovers after Trump survived an assassination attempt.
As Trump’s prospects increase in the 2024 presidential election, these policies are becoming increasingly relevant to investors. The former president has expressed strong support for the sector, with the Republican Party following suit by including Bitcoin rights in its new platform.
Jefferies highlighted five key policies proposed by Trump that could have a significant impact on the stock market, with a particular emphasis on the benefits this would have for crypto stocks.
Pro-crypto policy
According to Jefferies, Trump’s plan to extend the benefits of the Tax Cuts and Jobs Act (TCJA), which expires next year, is expected to continue providing tax relief for businesses and individuals. This expansion could boost consumer spending and business profitability, indirectly benefiting digital asset-related industries by increasing disposable income and investment.
Trump has also proposed further cuts in corporate tax rates, which could significantly improve the profitability of American companies. These policies are likely to boost market optimism and lead to more investments in various sectors, including those related to crypto.
Moreover, Trump’s intention to increase tariffs, especially on Chinese goods, could result in higher US inflation and changed global trade dynamics. Jefferies noted that these policies could encourage investment in alternative currency assets such as crypto and gold as investors look to hedge against inflation and currency devaluation.
Furthermore, a potential rollback of climate initiatives, coupled with expanded oil drilling, could benefit the energy sector but negatively impact clean energy companies. However, these policies could also indirectly promote crypto by reducing regulatory pressure and promoting a more favorable investment climate for energy-intensive Bitcoin mining activities.
Jefferies also pointed to Trump’s plans to reduce involvement in global conflicts such as the war between Russia and Ukraine, which could reduce geopolitical risks and contribute to market stability. This move is expected to benefit sectors that have a negative correlation with traditional commodity prices, further increasing the appeal of cryptocurrencies as a stable investment alternative.
Stocks benefit
Jefferies identified several crypto-related stocks that could benefit significantly from this policy, including Coinbase and MicroStrategy, due to their direct involvement in Bitcoin and crypto, as well as almost every major public Bitcoin miner, including Marathon Digital, Riot Platforms and Cipher Mining. , among other things.
The list also includes CME Group, Square and Paypal, which recently launched their own stablecoin and have significantly expanded their footprint in the crypto industry in recent years.
According to the report, these companies are poised to benefit from an environment where the appeal of the US dollar is waning and digital currencies are gaining traction as a store of value.
Jefferies emphasized how important it is for investors to stay informed and adapt their strategies to these potential policy changes. The expected support for crypto under a Trump administration could provide significant opportunities for growth in the crypto sector.