The crypto market has crashed under Donald Trump, with Bitcoin and other altcoins remaining in a technical bear market. Ethereum price has slumped to $1,950, down 60% from its all-time high, while Bitcoin has dropped 46%.
Bitcoin and Altcoins Have Diverged From Other Markets Under Trump
In contrast, global stocks have soared, with Canada’s TSX Composite soaring by over 30% in the last 12 months. The Nasdaq 100 and S&P 500 indices have all jumped by double digits and are nearing their all-time highs.
Top commodities have also continued rising this year. Gold price has soared above $5,000, while top commodities like silver and copper have continued their robust growth.
In theory, the crypto market should be thriving under the Trump administration. For one, Trump is the first American president to endorse Bitcoin and other cryptocurrencies. He owns TRUMP, a meme coin, and World Liberty Financial, which created USD1, a top stablecoin.
The Senate and House of Representatives have already passed the GENIUS Act and are now in the final touches of voting for the CLARITY Act.
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At the same time, the Securities and Exchange Commission (SEC) has adopted a crypto-friendly policy, including ending lawsuits against companies such as Uniswap, Coinbase, and Ripple Labs.
Unlike Gary Gensler, Paul Atkins, a former crypto lawyer, has publicly supported the industry. This explains why he has accepted several altcoin ETFs, including XRP, Solana, and Hedera.
The Federal Reserve has been relatively dovish under Trump, cutting interest rates three times and launching a mini quantitative easing program.
On top of this, the US dollar has crashed against most currencies, while geopolitical risks have jumped. Historically, Bitcoin was seen as a hedge against inflation, risk, and currency debasements.
Why the Crypto Market Crashed Under Trump
There are a few reasons the crypto market crashed despite all these bullish catalysts.
First, Donald Trump’s launch of the TRUMP meme coin and Melania’s MELANIA had a negative impact on the industry. TRUMP’s meme coin initially soared to $50 and has now plunged to $3.3, a crash that cost investors billions of dollars.
Second, volatility and risk have jumped during Trump’s administration. The key sources of risk include the trade war, the 12-day war, and the ongoing crisis in Iran. Many investors started selling when they realized that Bitcoin was not serving its role as a safe-haven asset. This explains why spot Ethereum and Bitcoin ETFs have shed billions of dollars in assets.
Third, the huge liquidation event on October 10 had a major impact on the crypto industry. Over 1.6 million traders were liquidated, wiping out over $20 billion. Since then, the futures open interest in the crypto industry has crashed from over $255 billion to below $100 billion today.
Additionally, the crypto market crash occurred even as key areas of the industry have thrived. For example, the market capitalization of all stablecoins has jumped to over $308 billion today. Also, the prediction markets like Kalshi and Polymarket have become the favorite tools for speculators, with millions of traders participating.
Finally, and most importantly, the ongoing crypto market crash is likely because of the normal cycle of the industry. Historically, Bitcoin and other altcoins always had major bear markets. For example, Bitcoin dropped to $15,500 in 2022 as the Federal Reserve hiked rates and top companies like Terra and FTX collapsed.
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