Market Analysis

Crypto Market Dips as Trump’s Influence Wanes

Amos Simanungkalit · 28 Feb186.2K Views

Image Credit: Reuters

Cryptocurrency prices have been sharply falling in recent weeks and are not expected to recover soon, with some of the largest digital currencies losing nearly all the gains made following Donald Trump's election victory, which initially sparked excitement in the industry.

Analysts suggest that the market will likely stay subdued, waiting for a bullish catalyst such as signals from the U.S. Federal Reserve on potential interest rate cuts or a clear pro-crypto regulatory framework from the Trump administration.

Bitcoin (BTC-USD), the largest cryptocurrency, has fallen 21% from its peak on January 20 and has returned to levels last seen shortly after Trump's election, as hopes for a national bitcoin reserve fade and concerns over tariff threats weigh on speculative demand. Other cryptocurrencies, like ether (ETH-USD), have experienced even steeper declines, with ether down more than 40% since December. Trump's own meme coin has plummeted 80% from its January peak.

During his campaign, Trump promised pro-crypto initiatives, including setting up a national bitcoin stockpile and overhauling crypto regulations. He also appointed crypto advocates like Howard Lutnick and David Sacks to key positions in his administration.

Under Trump, the Securities and Exchange Commission (SEC) has dropped investigations into several crypto firms and dismissed a lawsuit against Coinbase, the largest crypto exchange in the U.S. However, these actions have had minimal impact on crypto prices, leading some analysts to believe expectations of Trump's influence may have been too high.

In his first week as president, Trump issued an executive order to create a cryptocurrency working group tasked with proposing new regulations and considering a national crypto stockpile. This move disappointed some investors who had hoped for immediate action on buying bitcoin.

James Butterfill, head of research at CoinShares, noted that the market is facing uncertainty, particularly with more hawkish monetary policies and tariff threats, which aren't helping bitcoin’s prospects. Butterfill believes that until there is clarity on a bitcoin reserve, crypto prices are unlikely to recover significantly.

Since December, the global crypto market has lost nearly $1 trillion in value, with the total market capitalization now around $2.76 trillion. Many investors are adjusting their expectations, with reports from Trump's crypto working group not expected until at least a month from now.

Gabe Selby, Head of Research at CF Benchmarks, said that while the initial excitement about Trump's pro-crypto stance has subsided, a clearer regulatory framework or a major event like additional ETF approvals could shift market sentiment. The SEC approved its first ETFs linked to bitcoin's spot price last year, which helped push the cryptocurrency to new record highs.

Despite the market downturn, some analysts remain optimistic. Standard Chartered’s Geoff Kendrick maintains a target of $500,000 for bitcoin before Trump leaves office, believing that new buyers will enter the market. He also noted that hedge funds, banks, and sovereign wealth funds are increasing their investments in cryptocurrencies, with Mubadala Investment Co. of Abu Dhabi reporting a stake in BlackRock’s iShares Bitcoin ETF worth $436.9 million.