Cryptocurrency prices have taken a significant hit in recent weeks, wiping out nearly all the gains made after Donald Trump’s election victory. With almost $1 trillion erased from the crypto market since December, investors are left wondering: Was the post-election rally just a temporary illusion?
Bitcoin’s Sharp Decline: Losing Momentum
Bitcoin, the largest cryptocurrency, has plummeted 21% since reaching its peak on January 20. It has now returned to levels seen right after Trump’s election win in November. Many investors had high expectations for the Trump administration, hoping for policies that would boost crypto adoption, such as the creation of a U.S. Bitcoin reserve. However, those hopes have been met with disappointment.
Other cryptocurrencies have suffered even steeper declines. Ethereum has dropped over 40% since December, while Trump’s own meme coin, which surged before his inauguration, has crashed by 80%, according to CoinMarketCap.
What’s Driving the Crypto Market Down?
There are several factors contributing to the sharp decline in crypto prices:
- Regulatory Uncertainty: While Trump had promised a crypto-friendly administration, his actions so far have fallen short of expectations. His executive order to form a cryptocurrency working group was seen as a bureaucratic step rather than a direct move toward pro-crypto policies. Investors had hoped for immediate action, such as government-backed Bitcoin purchases.
- Interest Rate Uncertainty: Investors are waiting for a strong bullish signal, such as the U.S. Federal Reserve cutting interest rates. Until that happens, the market remains cautious.
- Global Economic Tensions: Trump’s tariff threats have added more pressure on speculative assets like cryptocurrencies. This uncertainty has made institutional investors hesitant to commit large funds to the crypto market.
Did the Crypto Market Overestimate Trump’s Impact?
During his campaign, Trump branded himself as the “crypto president” and appointed industry supporters to key government positions. The SEC even dropped its lawsuit against Coinbase, a major U.S. crypto exchange. However, these moves have not provided the market boost that many had hoped for.
“The market is disappointed,” said James Butterfill, head of research at CoinShares. “There was a lot of optimism, but no concrete steps have been taken to create a Bitcoin reserve or introduce clearer regulations.”
What’s Next for Crypto?
Despite the current downturn, some analysts remain bullish. Standard Chartered’s Geoff Kendrick predicts that Bitcoin could still reach $500,000 before Trump leaves office, arguing that new institutional investors will enter the market. Recent regulatory filings indicate that banks and sovereign wealth funds, including Abu Dhabi’s Mubadala Investment Co., are investing in Bitcoin ETFs.
Still, for the broader market to recover, investors need more certainty. “A clear regulatory framework or major catalysts, like additional ETF approvals, could shift sentiment,” said Gabe Selby of CF Benchmarks.
For now, the excitement around Trump’s pro-crypto stance seems to be fading. Investors are left waiting for real policy changes—if they come at all.
