Is Crypto's 'Trump Effect' Short-Lived?
A post-inauguration cooldown wasn’t unexpected, one analyst told Cointelegraph, but if Trump’s promises stall, “market sentiment will dampen further.” Many in the crypto community believed that US President Donald Trump’s second-term election would send Bitcoin prices skyrocketing, and it did — from $69,374 on Election Day (Nov. 5) to a record $108,786 when the new administration took office on Jan. 20.
But since that time, the price of Bitcoin (BTC) has mostly fallen, dropping below $80,000 on Feb. 28 — a 26% decline. The new administration stormed into office committed to establishing a strategic crypto reserve, crypto-friendly cabinet appointments, and market-structure reform legislation, among other changes.
It has mostly delivered on its promises so far. Still, it’s not too early to ask: Has the “Trump effect,” the surge in Bitcoin’s price anticipated from the election of America’s first crypto-friendly president, been oversold? Perhaps macro factors, like a looming tariff war and a weakening global economy, are to blame for the slumping market prices.
Then there was the Bybit hack in late February, which drained $1.4 billion from the world’s second-largest crypto exchange by volume. Perhaps the Trump administration itself is even to blame for fostering chaos and insecurity in its first six weeks in office?
Garrick Hileman, an independent cryptocurrency analyst, noted that while some investors were hoping Trump’s election would herald a golden era for crypto, others, such as prominent US hedge fund Elliott Management, were warning that Trump’s embrace of crypto could lead to an “inevitable collapse” that “could wreak havoc in ways we cannot yet anticipate.”
"While the recent Bybit situation has been significant, Bitcoin’s price momentum shift started well before the record-setting $1.46 billion hack," Hileman said.
Indeed, the correction follows traditional market cycles — i.e., a “classic” case of “buy the rumor, sell the news,” said Hileman, further observing: “The largest crypto gains occurred leading up to and just after Trump’s election victory, so a market cooldown was expected and may even be a healthy correction.”
Moreover, cryptocurrencies are more intertwined with traditional markets these days, making crypto prices sensitive to macroeconomic concerns like inflation, interest rates, and global economic uncertainty.
"Recent events, such as Argentina's president unexpectedly endorsing a pump-and-dump memecoin, highlight the risks of political figures engaging with crypto," added Hileman. "Meanwhile, the Trump family, with its own 'personal' crypto initiatives, 'risk making similar mistakes that could prompt a crypto backlash'," said Hileman.
Eric Trump’s encouraging X posts appear to have moved crypto markets.