Founder & director of Canda's first bitcoin fund provider explains why crypto has rallied post-election, and what influence a Trump administration may have on the asset class
The post-election rally that followed Donald Trump’s victory last week was perhaps most acutely felt by cryptocurrency investors. Bitcoin shot up over 30 per cent between November 6th and November 13th. Ether and Solana, the two other most widely-used cryptocurrencies, saw similar levels of growth. Even as broad markets experienced some pullbacks in their post-election rallies, bitcoin at least continued to rise. While driven by myriad factors, there is some bullishness among crypto investors stemming from Donald Trump’s own statements favouring cryptocurrencies. The question then arises, if a Trump administration does bring digital assets more into the mainstream, should Canadian institutions be taking a closer look at them?
Fred Pye, admittedly a digital asset bull, believes they should. Pye is the founder and director of 3iQ corp. the firm which launched some of Canada’s first OSC-approved bitcoin funds. His argument, though, hinges more on the merits of these assets than on the favour of a US President. While he expects that the Trump administration will create a culture more favourable to crypto assets that runs through key regulatory bodies like the SEC, he does not think the US treasury will start making a 5 per cent allocation to bitcoin. Even the recent rally, he says, hinges more on the removal of uncertainty than the winner of the election.
“If Harris had won, the correction would not have been the same size on the other size. Bitcoin was pent up for a rally,” Pye says. “Bitcoin was waiting for an excuse to explode to the upside and Trump’s verbal declarations that he is crypto-friendly were what the market was looking for…It’s the removal of uncertainty from the market and the US election. But I always remind people, bitcoin is not as US asset class, it’s a global asset class. Different parts of the world have different opinions on Donald Trump, but they’re still buying bitcoin.”
Pye argues that many institutions outside of hedge funds have avoided digital assets in part due to the supposed ‘risk-on’ nature of their performance. He argues, though, that bitcoin at least tends to be a risk-on and risk-off asset. Due in part to its inherent scarcity and finite quantity, Pye says it can function as an inflation hedge and rally when inflation expectations spike. Moreover, while he expects the currently expensive US stock market to pull back in the 2nd and 3rd years of the Trump administration, he thinks Bitcoin can continue to rally. That’s due to the looming liquidity crunch if and when bond markets force the US to pull back on its money printing.
While the US Securities and Exchange Commission (SEC) is not under the direct control of the Trump administration, Pye sees that institution gradually becoming more open to digital assets. That began with the approval of bitcoin ETFs in January of this year, something which Pye says was a product of the SEC’s hiring practices, bringing more staff onboard with a full understanding of digital assets. He expects this evolution to continue under Trump.
As this rally peaks investor interest, Pye believes Canadian institutions are somewhat limited by their lack of knowledge about digital assets. He says, even, that there is an element of disdain that comes from words like “crypto” and “token” which don’t engender the same gravitas as traditional securities and assets. Once the conversation shifts to smart contracts, payments, and the utility of blockchain technology, he says that the tone at institutions shifts. What he believes is required is a greater degree of education around how digital assets like bitcoin and ether connect to these networks and a wider degree of value addition.
Moreover, in the specific case of DB plans, Pye believes bitcoin can add value. He notes that DB plans struggle both with high inflation and with deflation. Bitcoin’s apparent hedge against inflation, he says, can help protect against rising liabilities. Its non-correlated performance can help protect against market downside during deflationary cycles.
He notes one key example of digital asset value, the elimination of ‘leakages’ from payments. Where the internet replaced many businesses that functioned as middlemen and siphoned money out of industries like publishing, media, and even telephones, digital assets can do that with transactions. Pye believes that adoption of digital assets can allow for transactions without leakages paid out to the banking system and payments companies.
Beyond textbooks and podcasts, Pye believes that this education needs to be discursive. Early adopters like himself need to sit down with institutional asset managers, not with any sales intent but with a focus on education.
“When it comes to the education process I think people have to talk to some of the old folks,” Pye says. “I wouldn’t be listening to Elon Musk and the people who say Dogecoin has anything to do with anything, it doesn’t. Anything named after a pet is not worthy. But technology, on the other side, there are some amazing blockchains out there doing some incredible things, and institutional investors should uncover those.”
