Ever since the polls closed, the cryptocurrency community has been reveling in a festive spirit akin to Christmas Day. For years, they have lamented the unfair restrictions imposed by unsympathetic regulators who seemed to misunderstand the digital asset landscape. Now, they anticipate an American leader who not only endorses their digital currencies but also appoints advocates to positions once held by skeptics. The influx of mainstream capital is palpable, with the prospect of a US bitcoin reserve now within reach. Cryptocurrency appears to have few obstacles in its path—except perhaps the industry's own tendencies. "Historically, we've had a penchant for self-sabotage," remarks Matthew Homer, a former financial regulator turned general partner at Department of XYZ, a crypto-focused venture capital firm. "There's a concern that we might become too exuberant, leading to a sudden and severe downturn."

The celebration is already in full swing. Bitcoin, a leading indicator of the industry's health, has effortlessly surpassed the $100,000 threshold this month, surging by 50% since the election and more than doubling over the past year. This is particularly remarkable given that, a year ago, the reputation of cryptocurrencies was at an all-time low, with the sector still reeling from the fallout of Sam Bankman-Fried's conviction for a multi-billion dollar fraud in November 2023. Even for an industry notorious for its cyclical booms and busts, this rally stands out. Four significant factors have converged this year to ignite the crypto market:

Mainstream Capital: A court ruling effectively compelled the Securities and Exchange Commission (SEC) to sanction a long-sought-after financial instrument in the crypto space—spot bitcoin ETFs, or exchange-traded funds. These ETFs simplify the process for traditional investors to participate in bitcoin's price fluctuations without the complexities of directly owning and securely storing the cryptocurrency in digital wallets.

The Halving Phenomenon: Approximately every four years, the rewards for bitcoin creation, a process known as "mining," are halved, which typically enhances its scarcity and, by extension, its value. The most recent halving occurred in late April, further fueling the rally initiated by the ETFs.

Easy Monetary Policy: Risky financial assets, including cryptocurrencies, tend to flourish in an environment of low-interest rates. Thus, the Federal Reserve's recent decision to cut rates has been a boon for investors across the board.

The Trump Influence: During the presidential campaign, Donald Trump underwent a dramatic shift in his stance on cryptocurrencies, a sector he had previously dismissed as fraudulent. He pledged to support the industry's interests if re-elected, with a key demand being the removal of Gary Gensler, the SEC chair known for his anti-crypto stance.At the same time, industry political action committees (PACs) injected record breaking funding into the campaign. Although these funds flowed to two parties, the cryptocurrency group specifically targeted key opponents, including spending $40 million to help overthrow Senate Banking Committee Chairman Sherrod Brown. The elected president subsequently appointed figures with a positive attitude towards cryptocurrency to key positions in his government, including Howard Lutnick, a financier with deep ties to stablecoin Tether, leading the Department of Commerce, and Paul Atkins, who advocates for deregulation, leading the SEC.

The industry quickly argued that they are not seeking special treatment, but rather hoping to establish a regulatory system that does not attempt to strangle cryptocurrency companies or force them offshore. If you are a regulator... you cannot choose which markets exist - your job is to accept that markets do exist and find the best way to set up barriers around them, "said Homer, who was responsible for digital asset licensing regulation at the New York State Department of Financial Services. I am excited about returning to fundamental principles and making people in these positions willing to engage in dialogue with the industry

Skeptics still view cryptocurrencies as the tulip mania of our time - a speculative asset without intrinsic value. If there is a textbook style 'bigger fool' game, this is one. But even the industry's biggest critics have felt the change. When I talked to Cas Piancey, a journalist from trade publication Protos and co host of the "Crypto Critics' Corner" podcast, he seemed to have accepted his fate and was ready to fasten his seatbelt to see what would happen. He told me that when he started reporting on cryptocurrency, he wanted to warn people about the risks to prevent them from wasting money. I realized that I was like shouting at gamblers in a casino, 'Oh my goodness, you're going to lose!' They were like, 'Do you think I don't know how slot machines work?' "he said. I just want to say, okay, I shouldn't try to win people's hearts at the casino. I can talk about the casino's issues and try to broadcast the risks to a wider audience, rather than trying to persuade anyone to leave

The next few years will be a major test. Has cryptocurrency really ended its criminal career and prepared to establish itself in a respectable society? Can it grow without self exploding and causing collateral damage to the financial system that has always been isolated from its turbulent ecosystem? As always, this is a huge bet.