Crypto Top Trumps

by Ryan Shea

Summary

January marked a powerful resurgence for the cryptocurrency market, fueled by Bitcoin reaching a new all-time high. The return of Trump presidency was closely watched, as his executive order to establish a working group on digital asset markets. Regulatory optimism propelled XRP to notable gains, while Ethereum faced growing challenges from the expansion of Layer 2 scaling solutions and internal discord.

Sixteen years ago last month, Bitcoin was released into an unsuspecting world when Satoshi Nakamoto mined the genesis block. Famously, the first Bitcoin block contained a headline from The Times newspaper from the same day stating that the UK Chancellor was considering a second bank bailout as a result of economic headwinds from the ongoing global financial crisis.

It was certainly an auspicious start for the fledgling cryptocurrency and ensured that this newspaper headline will never be forgotten – certainly not in crypto circles, if for no other reason than the Bitcoin blockchain contains a record of every Bitcoin transaction including those in the genesis block, and hence every copy of it contains the text of this headline – see image.

The Most Famous News Article In Crypto History

Source: The Times and Bitcoin blockchain

A lot has certainly happened since early 2009, but then again an awful lot has remained the same.

Plus Ça Change

One constant has been naysayers writing off crypto as nothing more than a hi-tech Ponzi scheme during bear markets only for them to have to eat a great big spoonful of humble pie a year or two later when, like a phoenix, crypto prices recover and go on to hit new all-time highs¹. This cycle has been absolutely no different.

At the time of writing, the global crypto market cap has risen to $3.5tr, which is more than 4X the 2022 bear market low. Bitcoin alone accounts for $2tr of the total, meaning it is perceived by investors collectively to be as valuable as Amazon or Google (Alphabet). Achieving a market cap of that magnitude required a new all-time high in Bitcoin’s price above six figures (it hit a new all-time high of almost $109,000 on January 20); a possibility previously dismissed by the crypto sceptics as impossible – see image.

Never Say Never, Right?

Source: X

Top Trumps

The catalyst that helped propel crypto prices higher over the past month (the Trakx Top10 Crypto CTI – our benchmark large cap crypto index – gained 10% in January) was increased optimism about what the imminent arrival of the first crypto-friendly US president would mean for the asset class.

All the indications prior to Trump’s inauguration were that his administration would take a much more constructive approach to digital assets relative to the Biden administration (admittedly a very low hurdle). Having previously appointed Paul Atkins to replace the hated Gary Gensler as head of the SEC and David Sacks as the new AI & Crypto Czar, both of whom are known crypto supporters, last month saw Tom Emmer, the pro-crypto representative of Minnesota, appointed vice Chair of the House Subcommittee on Digital Assets, Fin Tech and AI and Senator Cynthia Lummis (AKA Crypto Queen) appointed chair of the Senate Banking Subcommittee on Digital Assets.

In celebration of what many crypto fans view as a pivotal moment in the evolution of digital assets, Bitcoin miner Mara Pool inscribed an image of Trump on the Bitcoin blockchain at block height 879613 – see image.

Source: https://mempool.space

If that wasn’t enough, the Sunday prior to inauguration day two meme coins were released on the Solana blockchain (where else does one go to list meme coins these days?!). Despite being unimaginatively named $TRUMP and $MELANIA – after the first lady – these two tokens surged in price when the initial circulating supply of 200 million tokens were released to the public. At one stage the combined market cap of these tokens hit $17bn, meaning the two Trump affiliate companies CIC Digital and Fight Fight Fight Llc which maintained control of the other 800 million pre-mined tokens were sitting on bags worth more than $30bn (at least on paper).

One could argue the $TRUMP/$MELANIA meme coin launches served to underline Trump’s commitment to the digital asset space – if for no other reason than he will likely want to cash out at some future stage. But, like many others in the crypto sphere, we thought the president-elect behaving like a degen and pumping his own bags just hours before becoming the most powerful politician on the planet was hardly an edifying spectacle.

Political Rug Pull?

Be that as it may, with expectations in the crypto community sky high come inauguration day, the potential for disappointment was always tangible. And indeed, so it came to pass.

Media reports in the days running up to Trump being sworn into office suggested he would hit the ground running issuing a slew of crypto positive executive orders. Top of the list was reversing the SAB 121 accounting policy which acts as a deterrent to financial companies owning digital assets via a custodian because they must be reported as a liability on their balance sheet. It was also expected that there would be swift redress to the crypto debanking program, commonly referred to as Choke point 2.0, which Trump has previously promised to end. However, while Trump busied himself signing a multitude of executive orders in his first day back in the Oval office – see image – crypto did not feature in any of them.

Source: X

The lack of Day 1 policy action triggered a sharp correction in crypto prices, with our Top10 Crypto Index shedding more than 4% in less than 24 hours (this was nothing in comparison to the 26% and 54% crashes in Trump’ two meme coins). Some attributed the price slump to fears that Trump had done the political equivalent of a rug pull on the community. However, as we noted before, there are lots of more pressing issues beyond crypto that required the attention of the new administration. All the correction signaled was the impatient nature of crypto degens. Indeed, the folly of knee-jerk selling was made patently clear just a day or two later.

Speaking via videolink at the annual WEF conference in Davos, Switzerland, US President Donald Trump reaffirmed his administration’s commitment to ensuring that the US becomes the “world capital of artificial intelligence and crypto”. And, backing up his words with actions, Trump issued executive order seeking to establish a working group on digital asset markets. The working group has been tasked with proposing a new Federal regulatory framework governing the issuance and operation of digital assets in the US. Additionally, and certainly of interest to crypto fans, the group was asked to evaluate the potential creation and maintenance of a “national digital asset stockpile and propose criteria for establishing such a stockpile”. The order was warmly received by the crypto bulls because nation state adoption is very much a “live topic” in the space as we pointed out in our 2025 outlook.

Finally, Trump pardoned Ross Ulbricht the convicted founder of Silk Road – see image. In establishing this darknet market, Ross provided the first real test for Bitcoin use at scale and has long been viewed as a scapegoat by the crypto community for the unduly harsh double-life in prison sentence he received. Coming the first full day of his second term, Trump clearly delivered on one of his key election promise, something one does not get to say too often about elected politicians, and given his pro-crypto campaign rhetoric this bodes well for the sector over the next few years².

Source: X

XRP In the Spotlight

One notable winner from the bout of crypto bullishness seen last month was XRP – the native token of Ripple. It was the star performer among the mega cap cryptocurrencies rallying more than 40% and hitting a seven year high in the process. This was despite the SEC filing an appeal mid-month challenging an earlier ruling by a US District judge that XRP sales to retail investors did constitute unregistered securities – a longstanding accusation of the SEC that has overshadowed XRP for several years now. Anticipation that the Trump administration’s more constructive approach, combined with greater legal clarity, will spark increased institutional interest in digital assets is a big positive for a token like XRP as it was designed more for the corporate world than retail.

Unlike most cryptocurrencies XRP does not follow the decentralized trust-minimizing model. Instead, it relies upon trusted nodes validating transactions using what is known as Federated Consensus rather than the most commonly used, Proof of Work or Proof of Stake protocols. The advantage of this centralized approach is that it overcomes the scalability issues that limits transaction bandwidth in decentralized cryptocurrencies like Bitcoin. For crypto anarchists, the high degree centralized power of XRP is an anathema, but for corporates who require high transaction volumes and who already operate within a high-trust environment (a necessary feature of all fiat money systems) these drawbacks are minimal relative to the ability to send and settle international transactions near instantaneously – a big improvement on the legacy commercial banking infrastructure.

The other difference between Bitcoin and XRP is that all of the 100 billion XRP tokens that will be in existence have already been pre-mined, with the majority (some 55 billion) held in a locked escrow account. This account releases 1bn XRP per month in order to ensure a stable and predictable supply curve. The token is, however, ultimately deflationary because every transaction on the blockchain requires the sender to burn a small amount of XRP – so the greater the number of transactions the greater the more limited the supply of XRP. Hence, XRP represents a good vehicle to leverage exposure to a scenario where there is increased institutional/corporate usage of crypto and blockchain technology.

Ethereum’s Identity Crisis

Unlike XRP, Ethereum has been struggling somewhat, with its price still to take out the 2021 crypto bull market high. As pointed out in our 2025 Outlook, one key performance drag has been the increased deployment of Layer 2 scaling solutions on the Ethereum blockchain. These have cannibalized a lot of the Layer 1 transactions, negatively impacting the amount of ETH burned (as per EIP 1559) which helps offset new ETH issued to validating nodes in return for staking ETH.

Such an unfavourable shift in net supply dynamics would unsettle the supporters of most other digital tokens who typically have a “number-go-up” mindset, but not hard core Ethereum supporters. They, in contrast, tend to be “in it for the tech” and consequently adopt a more sanguine position – one almost bordering on benign neglect – when it comes to ETH’s price.

Exemplifying this approach is the Ethereum Foundation (EF), a non profit dedicated to supporting the blockchain and associated technologies. The executive director of EF, Aya Miyaguchi, has been criticized for not being business savvy enough and for a lack in transparency about the foundations management of its $800 million treasury – mostly held in ETH – it uses to fund R&D, and which in the eyes of many had not proved to be very a productive investment.

Discontent in Ethereum has been steadily rising over recent months, but this has been largely out of the public view, but last month it exploded into the open after Vitalik Buterin lambasted another user on X for trying to oust Aya – see image.

Source: X

The most striking aspect of the tweet was his statement that is is him, and him alone, who is responsible for deciding the EF leadership team. While it is true that ETH and the EF are two separate entities, they are nonetheless unequivocally entwined and such public statements gravely damage the notion of Ethereum being a highly decentralized blockchain. Whether crypto users warm to Vitalik “wartime CEO” Buterin, and whether Ethereum can see off the challenges from other decentralized PoS blockchains (hint: Solana) or not remains to be seen. History though, suggests that crypto civil wars tend to be quite dramatic affairs see Bitcoin blocksize wars. So things could definitely get interesting at the rainbow unicorn end of the crypto spectrum!

1 Admittedly a relatively low bar in a world were central banks are mandated to consistently devalue fiat money

2 Of course, this is not meant to imply that the price of crypto will move up in a nice straight line during Trump’s second term. Like every other financial asset on the planet, there will be ups and downs with shocks coming in the form of positives and negatives like the recent Deep Seek AI model reveal that triggered a liquidation cascade late in the month in both AI stocks and crypto tokens. Such things are inevitable in the world of finance – that’s half the fun of investing!