- The cryptocurrency market has lost a third of its value since peaking in early December.
- Market gains made during the Trump rally have been erased in the wipeout.
- Insiders say the industry lost focus.
In December, crypto was riding high as the incoming Trump administration promised an end to Washington’s crackdowns and an influx of capital from institutional players.
The market is not riding high anymore.
Investors, spooked by a raft of worries, are running for the hills as the crypto market shed a staggering $1 trillion in market value since the December peak.
Bitcoin is down 15% in the last seven days and has lost a quarter of its value since Donald Trump was inaugurated on January 20. And Ethereum has skidded 21% in the last week.
“The Trump pump has been vapourised as cryptocurrency markets enter extreme fear mode,” Petr Kozyakov, the CEO of Mercuryo, a payment infrastructure platform, told DL News.
What went wrong?
Some investors say the industry was carried away by the dopamine-fuelled speculative mania driving memecoins.
“We’ve been hypnotised by price spikes, memecoin frenzies, and media spectacles,” Dom Harz, co-founder of Bitcoin layer 2 network BOB, told DL News.
“Forgetting that crypto was meant to be a new financial system — one built on decentralised protocols that make finance accessible to everyone.”
Macro risks
Then there’s economic and monetary policy concerns, which investors typically shorthand as “macro risks.”
Trump’s threats to impose tariffs as high as 25% on the US’ top trading partners — Canada, Mexico, and the European Union — have rattled the markets even though he vowed to take such action throughout his 2024 campaign.
The problem is that imposing import penalties on hundreds of billions of dollars worth of goods invariably spurs prices to surge for consumers as well as businesses.
Just as inflation was finally falling to normal levels, the White House’s economic policies are now fanning concerns that the Federal Reserve will choose to maintain the benchmark interest rate at 4.5% or even signal an increase to dampen price hikes.
James Toledano, chief operating officer of crypto wallet Unity Wallet, said industry stakeholders feel “let down” by Trump.
“The promise was great, and the reality is potentially proving to be catastrophic,” Toledano told DL News.
“With one hand he giveth and the other, he taketh away,” Toledano added. “But he doesn’t seem to realise that both hands are connected to arms of the same body.”
Worse may be on the way, says Arthur Hayes, the crypto influencer and head of Maelstrom, his family office. On Tuesday, he said Bitcoin could go as low as $70,000, a prediction echoed by others later in the week.
Bullish signs
Still, even as crypto investors find their footing, they are seizing on some positive developments.
The US Securities and Exchange Commission is dropping or postponing the numerous enforcement actions it brought against the industry during the Biden administration.
It’s an extraordinary step for a federal regulator to take. But Trump vowed on the campaign trail to undo the “regulation by enforcement’ strategy pursued by former SEC Chair Gary Gensler.
And leading crypto players — Coinbase, VC firm Andreessen Horowitz, Ripple, the Winklevoss brothers — showered Trump and his fellow Republican candidates with tens of millions of dollars in campaign contributions.
Whatever comfort the SEC’s retreat is bringing is being offset by the outrage triggered by “cash grab” memecoin offerings, including two sponsored by the president and the First Lady themselves.
On Thursday, the regulator largely conceded memecoins have virtually no utility or role as investments and deemed them more like collectible assets, such as vintage toys or comic books.
But they do raise a lot of money — taken together, they sport a $60 billion market value, according to CoinGecko.
While memecoin mania may be hurting the crypto narrative at the moment, promoters say they aren’t going away, even if they are simple gambling plays.
“It’s the web3 industry’s job to build funnels to the underlying tech and exciting projects building real-world utility,” Jack Land, head of growth at Solana-based real-world asset platform MetaWealth, told DL News.
“Love them or hate them, memecoins are web3’s best marketing tool.”
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? please contact him at osato@dlnews.com.
