According to Paul Krugman, a Nobel Prize-winning economist and professor at the Graduate Center of the City University of New York, the sharp decline in Bitcoin's value has occurred concurrently with indications of President Donald Trump's waning political influence, and this is not by chance.
TL;DR
- Paul Krugman links Bitcoin's sharp decline to Donald Trump's waning political influence.
- Bitcoin's price plunge suggests the "Trump trade" is unraveling, according to Krugman.
- Krugman argues Trump's supportive measures for crypto are tied to his family's wealth.
- Trump's diminished power weakens his ability to promote the cryptocurrency sector.
Fresh off its all-time high of $126,000 last month, Bitcoin has been in freefall for the past month, sitting at about $87,000 as of Wednesday after falling to a six-month low of about $81,000 last week. Cryptocurrency’s broader $1 trillion selloff has even cost the Trump family—with its ample ventures in crypto—$1 billion of its fortunes, according to the Bloomberg Billionaires Index.
According to Krugman, who previously served as a vocal and long-standing New York Times columnist, Bitcoin's recent downturn suggests that Trump's influence has waned. Krugman points out that Trump has consistently supported the cryptocurrency sector, while also holding substantial stakes within it.
“How should we understand Bitcoin’s recent crash? Think of it as the unraveling of the Trump trade,” Krugman said in a Substack post on Monday. “Trump remains as determined as ever to reward the industry that made his family rich, and those around him are as determined as ever to make America safe for predators of all kinds.”
“But Trump’s power is visibly diminishing, so the price of Bitcoin, which has in effect become a bet on Trumpism, has plunged,” he added.
Krugman’s argument of a ‘Trump trade’ collapse
Krugman, who has openly expressed his disdain for cryptocurrencies (and for Trump and Trumpism), contends their ascent is fundamentally tied to the Trump administration's array of supportive measures and initiatives for crypto investors and platforms. This encompasses advocating for the establishment of a government Bitcoin reserve, alongside issuing an executive directive in August permitting U.S. Individuals to invest retirement savings in cryptocurrency, along with various other holdings. In the preceding month, Trump pardoned Binance founder Changpeng Zhao, who admitted guilt in 2023 for breaching U.S. Anti-money laundering statutes during his tenure as chief executive of the cryptocurrency exchange.
Trump himself holds an estimated $870 million in Bitcoin, making him one of the largest investors in the currency, and his family has grown its own crypto empire over the last few years. In September, American Bitcoin, a Bitcoin mining company backed by Eric Trump and Donald Trump Jr., began trading under Nasdaq and notched a $5 billion valuation in its debut. A Coins2Day analysis published in March found Trump’s crypto holdings made up about $3 billion of his net worth.
The President's wider policy actions have been linked to previous cryptocurrency downturns, such as the one last month that occurred concurrently with the president's weighing an additional 100% tariff regarding China.
However, Krugman recently observed that Trump's partisan sway has diminished, demonstrated by near-unanimous bipartisan support concerning the disclosure of the Epstein documents, and also by waning Republican approval regarding the president's management of the financial system following growing concern during a “K-shaped economy.” This is in addition to significant Democratic triumphs in elections, such as the selection of mayors identifying as democratic socialists in New York and Seattle.
In Krugman’s eyes, these election defeats and increased scrutiny of Trump’s handling of the economy loosen Republicans’ willingness to show “lockstep obedience” with the president. He cites blogger and journalist Josh Marshall, who has posited that “power is unitary,” or that weakness in any part of the president’s image translates to an overall perception of weakness, which extends in his influence in the crypto sector.
“A weakened Trump is less able to work his will on all fronts, including his efforts to promote crypto,” Krugman said.
Certainly, Krugman might be quite lenient regarding the extent of recognition he bestows upon Trump for his influence over digital currencies, which function within their own distinct sphere, merely bordering those who wield governmental authority. White House representative Kush Desai stated that the Trump administration is enacting measures intended to foster the growth of digital currencies and rejected the notion that external elements unrelated to policy during Trump’s tenure could impact the valuation of Bitcoin.
“Only a moron would ignore these policies and attribute price fluctuations for a privately traded cryptocurrency to non-economic matters concerning the President,” Desai told Coins2Day in a statement.