Trump’s Crypto Policies Spark Market Uncertainty Amid Regulatory Easing

WASHINGTON, D.C. — As the United States prepares for Donald Trump‘s inauguration on January 20, the cryptocurrency market is bracing for potential turbulence. Bitcoin, which hit a record high of $81,917 in December 2024, faces uncertainty as Trump’s regulatory policies could either bolster or destabilize the market.

Trump’s campaign promises to make the U.S. a cryptocurrency hub have fueled optimism among investors. However, analysts warn that his administration’s approach to regulation could leave the market vulnerable to manipulation and speculative bubbles. “Bitcoin’s problem at the moment is the strong dollar,” said Zach Pandl, head of research at Grayscale Investments. “Not every aspect of the Trump policy agenda is going to be positive for bitcoin.”

The cryptocurrency market has seen increased institutional interest, with major players entering the crypto derivatives market. This has boosted liquidity but also raised concerns about the potential for a market crash similar to the dotcom bubble of the late 1990s. Financial market bubbles occur when asset prices far exceed their fundamental values, and their collapse can trigger widespread financial instability.

In 2022, the collapse of Terra Luna and the bankruptcy of Silicon Valley Bank (SVB) in 2023 highlighted the interconnected vulnerabilities between the crypto sector and traditional finance. “Contagion flows in both directions,” said one analyst. “The closer linkages between the crypto sector and traditional finance increase vulnerabilities in both sectors.”

Celebrity endorsements and social media hype have also played a significant role in driving speculative demand for meme coins. Influential figures like Elon Musk have been accused of promoting pump-and-dump schemes, where the price of a coin is artificially inflated before being sold off, leaving other investors with losses. “Celebrities should refrain from encouraging their followers to invest in any cryptocurrency without transparently disclosing their financial involvement,” said one expert.

The Securities and Exchange Commission (SEC) has launched several investigations into celebrities promoting cryptocurrencies without disclosing their financial interests. However, with the resignation of former SEC head Gary Gensler and Trump’s intention to nominate a new chair, there are concerns that regulatory oversight could weaken. “If the SEC turns a blind eye, consumers could be left entirely unprotected from financial losses,” said one analyst.

As the crypto market moves closer to mainstream adoption, the risks of speculative bubbles and financial misconduct remain significant. While Trump’s policies may drive up crypto asset prices in the short term, the long-term implications for financial stability and investor protection are uncertain.