Trump’s Crypto Gambit Falters as Market Downturn Deepens

Donald Trump's recent endorsement of cryptocurrencies may have backfired. The Dogecoin contributions he celebrated last month

Arslan Butt•Tuesday, August 6, 2024•2 min read

Donald Trump’s recent endorsement of cryptocurrencies may have backfired. The Dogecoin contributions he celebrated last month have plummeted in value, mirroring the steep decline across the cryptocurrency market.

According to a recent report by Coindesk, Bitcoin’s price fell by 15% in just 24 hours, while Ether dropped by 21% during the same period. Major cryptocurrency exchange Coinbase also reported a 17% decline in its stock value.

There has been a lot of positivism around #bitcoin.
Prices suddenly fell, and there's no accurate explanation other than that we suddenly had a bad day, and everybody started selling and panicking.
Control your emotions and remember the actual value of your investment.#HODL pic.twitter.com/3HsMEyyKJb

— Leonardo (@leonardoFF15) August 5, 2024

These significant losses are reflective of a broader trend that some analysts are calling a “perfect storm” of market challenges.

Analyzing the Market’s Sharp Decline

The current instability in the cryptocurrency market has been exacerbated by substantial asset liquidations by major trading firms.

The Block reported that Jump Trading has moved to liquidate a significant portion of its holdings, including “unstaking” $315 million worth of Ether and transferring it to exchanges for sale.

This move is part of a larger trend of asset liquidation and is perceived as a preparation for a broader sell-off, sending ripples of panic across the market.

“These actions have set off a chain reaction, prompting a widespread retreat from crypto investments as market confidence wanes,” noted a financial analyst from The Block.

Moreover, the general downturn in the global markets has contributed to the decline. Japan’s Nikkei 225 dropped over 12%, and the Nasdaq experienced its worst three-week stretch since 2022, amplifying the bearish sentiment across financial markets.

These broader market woes, coupled with inflation concerns and tightening monetary policies, have dampened investor enthusiasm for high-risk assets like cryptocurrencies.

Trump’s Political Calculations and Economic Assertions

Amidst this financial turmoil, Trump has remained vocally supportive of cryptocurrencies.

His appearance at a Bitcoin conference in Nashville aimed to consolidate political support from the tech community, emphasizing his campaign’s adoption of crypto contributions through integrations with Coinbase and Gemini.

However, his timing may be ill-advised as the market faces severe fluctuations.

Trump has also capitalized on the economic downturn to launch a series of attacks against the Biden-Harris administration, blaming them for the market’s instability.

He asserted on Truth Social: “STOCK MARKETS ARE CRASHING, JOBS NUMBERS ARE TERRIBLE, WE ARE HEADING TO WORLD WAR III,” using these challenges to fuel his “TRUMP CASH vs. KAMALA CRASH!” campaign.

Yet, many economists argue that the Federal Reserve’s policies under Jerome Powell, whom Trump nominated, play a significant role in the economic slowdown.

Powell has resisted widespread calls from progressive Democrats and economic advisors to lower interest rates, which many believe could prevent a recession.

Despite these economic challenges, the U.S. economy has shown some resilience. According to a report by the Boston Consulting Group, over 15 million new jobs have been added since the current administration took office, and unemployment reached a 53-year low in January last year.

These figures suggest that while the market faces immediate headwinds, the foundational aspects of the economy remain robust.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.