Trump, pump, dump: three words to sum up the past year for bitcoin. First, Donald Trump’s arrival as the self-proclaimed “crypto president” pumped up the value of the leading crypto currency, along with other crypto products, as regulatory hostility gave way to cheerleading. In early October, the price of a bitcoin reached a record $126,200, up from around $70,000 on election day 2024.
Since then, and especially this month, bitcoin has been in freefall, approaching $80,000 on Friday, more than one-third below October’s high. This may be bitcoin’s worst month since June 2022 during the “crypto collapse”. Ethereum and other crypto currencies have also tumbled.
What initially seemed to be profit taking by investors banking some of their considerable winnings is now a rout, as highly leveraged investors sell to reduce their risk. Given that what is being traded is a piece of code with no intrinsic value other than what someone is willing to pay for it, things could get much worse.
This need not derail the broader cryptofinance revolution, from stable coins to smart contracts, but it might. This stark reminder that the best-known crypto product is a risky speculative asset could change attitudes, especially were the Trump family to turn out to have been early sellers of their substantial bitcoin holdings.
The idea that bitcoin is a hedge against inflation, or is a prudent addition to central bank reserves, has been hurt. It is hard to see what the upside case is for bitcoin now. It would make sense for wealthier hardcore crypto believers to start buying to stabilise the market and change the mood. Maybe Mr Trump will give it another pump.
Would anybody be surprised if the president ordered the US Treasury to start buying bitcoin to make crypto great again?
Photograph by Mladen Antonov/AFP via Getty