Even at the calmest times, the cryptocurrency market is notoriously unpredictable. Fast forward to today, with Donald Trump reentering the political stage, and it faces a completely different set of headwinds. As one who has made a career covering financial markets, I understand how quick and volatile market sentiment can be. Few people have the power to move the markets as much as Trump can. I think his administration would do a lot to set the right tone and momentum for crypto in a positive way. The uncertainty over his policies creates the kind of instability that may ultimately jeopardize the industry’s longer term potential.
Economically, judging the Trump presidency based on the stock market’s performance has been a hit or miss proposition. Though there were streaks of consistent, strong growth, there were periods that experienced steep declines. At its low, the S&P 500 was down 4.4% on the year. Luckily, it rebounded and posted 17.6% in annualized returns over the ensuing three-year period. This volatility alone highlights the difficulty of forecasting any market movement under his direction. Law & Policy trump’s legacy creates a messier portrait than previous administrations. By contrast, Bill Clinton and Barack Obama basked in record market increases.
The recent memecoin boom proved to be a precursor to Trump’s election in November 2024. When he tweets there’s no question that his presence can immediately reconfigure crypto markets. This knee-jerk reaction to the news is a good example of how speculative and sentiment driven the crypto space continues to be, often leading to extreme price fluctuations. Those rallies can deliver easy money for investors on the sidelines. They tend to be poorly warmed up, easily turned back almost overnight, resulting in huge losses for many.
The most significant among these is arguably what we are calling the “Crypto EO.” This executive order aims to develop robust guidelines for digital assets, ensuring consistency and accountability. New AI & Crypto Czar David Sacks chairs the new Presidential Working Group on Digital Asset Markets. This coalition has been working to suggest better improvements to existing regulations and crafting new legislative measures. The objective, in theory, is to encourage safe and sound development of new technology and innovation in the blockchain industry. Executive orders are often quickly undone by later administrations. This creates a second layer of uncertainty regarding their effects.
Trump could not do great damage to the economic policy that concerns me most. His unpredictable moves and tweets might further add to the current price-sensitive and volatile cryptocurrency market. Whether it’s sudden regulatory action from administration or an unexpected announcement on policy direction, these things have a tendency to fan the flames of fear and uncertainty. This pushes investors out of crypto and curbs innovation.
Caveat the possible unintended consequences. Economic uncertainty, potentially fueled by Trump's trade policies or fiscal decisions, could trigger a recession, leading to a broad decline in asset prices, including cryptocurrencies. Soaring government spending has become a hallmark of Trump’s economic agenda. This demand explosion may potentially ignite inflation, doing even greater harm to the value of cryptocurrencies and any high-flying investments.
There are possible benefits that warrant attention. Under the right conditions, a fully realized version of Trump’s pro-crypto stance would undoubtedly increase adoption and open up new avenues of growth for the cryptocurrency market. Regulatory backing of innovations such as Ethereum and Solana ETPs would open the floodgates of institutional capital while providing further liquidity and upward price pressure.
From my perspective, though, the potential punishments far exceed the potential benefits. This unpredictability does not provide a sturdy platform for the uncertain cryptocurrency market to stand on, and that’s part of the issue behind Trump’s policies. Investors are foolish, short-sighted and reckless and crave certainty above all else. When speculation and fear take the place of that certainty, they tend to retreat, which stifles the sector’s long-term potential for growth.
The ultimate question is whether the short-sighted potential for improved near-term gains is worth the risk of long-term financial instability. I think we all agree that we need a more measured and predictable approach to regulation. Now, we need Congress to follow suit and help create a healthy and sustainable cryptocurrency market. Trump’s administration should make its own opportunities to foster this growth. The added vigor it introduces through uncertainty could neutralize the very positive effects expected from this nascent industry.
The entire crypto market ecosystem deserves a solid foundation to continue growing. Although the promise of speedy returns is tempting, prosperity built to last can only be achieved with a stable regulatory framework and smart economic strategy. Trump's approach, while potentially offering short-term gains, risks undermining the very stability that the crypto market needs to reach its full potential. The future of crypto with Trump is a wild card. Only time will tell if the promised benefits trump the risks baked into this effort.
