Trump-affiliated crypto ventures face setbacks in second term

The Rise and Fall of Trump-Linked Crypto and Stocks

Stocks and cryptocurrencies associated with former President Donald Trump have experienced a dramatic downturn this year, contrary to initial expectations. This has led to significant losses for many of his supporters. Among the most notable is the Trump Media & Technology Group (TMTG), which has seen its shares drop over 70% since taking office on January 20. Additionally, digital "meme coins" named after Trump and his wife, Melania Trump, have suffered even more severe declines, with losses of 86% and 99%, respectively.

These tokens were launched just before Trump’s inauguration and quickly gained traction on crypto forums and partisan media. However, after 11 months, the results have not been favorable. At its peak, the TRUMP token reached $75.35, but it later dropped to as low as $1.21. Similarly, the MELANIA token, which once hit $13.73, now trades at just $0.12. Another venture under the Trump family, World Liberty Financial, has also declined by about 40% since its September launch.

The Nature of 'Trump Trades'

Johnny Gabriele, CEO of Daedalus Consulting, highlighted that these "Trump trades" were never genuine investments but rather speculative ventures. He compared them to non-fungible tokens (NFTs), emphasizing the need to question where the value comes from and whether one is comfortable with such risks. Gabriele noted that while World Liberty Financial was somewhat different, it still resembled a copy-paste version of existing protocols.

He also pointed out that the Trump administration's policies, including tariffs and legal issues, have had a negative impact on the crypto sector. According to Gabriele, the environment surrounding crypto and web3 has become riskier, deterring potential investors.

Initial Optimism and Promises

Initially, Trump-linked stocks were buoyed by optimism about his administration's potential to bring deregulation, tax cuts, and favorable cryptocurrency policies. During his campaign, Trump promised to make the U.S. the "crypto capital of the planet" and to establish a "strategic reserve" of bitcoin.

On his second day in office, Trump pardoned Ross Ulbricht, the founder of Silk Road, a notorious online marketplace that used cryptocurrency for transactions. Ulbricht had been serving two life sentences. On his third day, Trump signed an executive order aimed at boosting crypto in the U.S., criticizing the previous administration's regulatory actions as a “war on cryptocurrency.”

In July, Trump enacted the GENIUS Act, which weakened consumer banking safeguards for stablecoins. In October, he pardoned Binance founder Changpeng Zhao, who faced investigations by the Biden administration regarding money laundering and tax crimes. Zhao and Binance pleaded guilty in November 2023. When asked about the pardon, Trump stated that he acted at the request of "a lot of very good people."

Impact on Crypto Investigations

Since Trump's return to the White House, the Securities and Exchange Commission has either closed or postponed 18 investigations and legal cases involving crypto companies. Meanwhile, Trump's son, Eric Trump, entered the crypto mining sector with American Bitcoin Corp. Shares of the company plunged sharply, losing over 30% of their value in a short period. Despite some recovery, the stock closed down 39%.

Hilary Allen, a law professor at American University’s Washington College of Law, noted that the Trump presidency has had a mixed effect on legitimacy. She pointed out that many of Trump's crypto projects lost value quickly, which did not help in achieving legitimacy through the Trump family.

Broader Market Trends

The decline in Trump-related assets is not isolated. Bitcoin, which reached a record high of $124,752 on October 10, has since fallen nearly 30% to $87,845. Overall, Bitcoin has lost more than 11% of its value since Trump returned to the White House.

Shmuel Shayowitz, president of Approved Funding, suggested that the current market trends reflect a natural unwinding of hype-driven trades tied to Trump's name, rather than a reflection of his policies or broader economic direction. He emphasized that the markets are responding favorably to Trump's real economic agenda, but this does not necessarily translate to these "side-show" assets.

Future Outlook

Shayowitz believes that the Trump administration will focus more on its crypto agenda and policies in the future, potentially leading to renewed momentum in the sector by 2026. He advised investors to focus on fundamentals and value, rather than fanfare or speculation.