Krugman: Bitcoin Crash Reflects Trump’s Losing Power
Bitcoin’s precipitous decline in value has been increasingly linked to a perceived decrease in the political influence of former President Donald Trump, according to economist Paul Krugman. The cryptocurrency, previously peaking at $126,000 last month, has experienced a substantial downward trend, currently trading around $87,000 as of Wednesday, reaching a six-month low of approximately $81,000 last week. This broader downturn within the cryptocurrency market has resulted in a $1 billion loss of fortune for the Trump family’s various ventures engaged in the sector, as documented by the Bloomberg Billionaires Index.
Krugman, a Nobel Prize-winning economist and former New York Times columnist, views Bitcoin’s latest downturn as a reflection of Trump’s diminished authority. He notes the former president’s longstanding support for the cryptocurrency industry and significant investments within the sector. “How should we understand Bitcoin’s recent crash?” Krugman stated in a Substack post on Monday. “Think of it as the unraveling of the Trump trade.” Krugman’s argument posits that Bitcoin’s price has become intrinsically tied to Trump’s political standing, and as his influence wanes, so too does the cryptocurrency’s value.
A key element of Krugman’s analysis is the connection between Trump’s policy initiatives and the rise of Bitcoin. These include proposals for a government Bitcoin reserve and an executive order in August permitting U.S. citizens to invest retirement savings in cryptocurrency, alongside other alternative assets. Furthermore, the pardon granted to Binance founder Changpeng Zhao, who had previously pleaded guilty to money laundering violations, further reinforces this connection. The Trump family’s involvement extends beyond the former president; American Bitcoin, a Bitcoin mining company supported by Eric Trump and Donald Trump Jr., successfully debuted on the Nasdaq, achieving a $5 billion valuation. A Fortune analysis from March indicated that Trump’s cryptocurrency holdings constituted approximately $3 billion of his total net worth.
The timing of these declines has been notably correlated with broader shifts in the political landscape. Krugman observes that Bitcoin’s fall aligns with Trump’s waning partisan influence, evidenced by near-universal bipartisan support for the release of the Epstein files and diminished Republican approval of the president’s economic handling, particularly amid concerns about the “K-shaped economy.” This situation is compounded by substantial Democratic victories at the polls, including the election of democratic socialist mayors in New York and Seattle. Krugman believes these electoral outcomes, coupled with increased scrutiny of Trump’s economic stewardship, have weakened Republicans’ willingness to demonstrate "lockstep obedience" with the president. He cites blogger and journalist Josh Marshall’s assertion that “power is unitary,” meaning that any indicators of weakness in the president’s image translate to a general perception of vulnerability, extending to his influence over the cryptocurrency sector.
White House spokesperson Kush Desai countered this perspective, asserting that the Trump administration’s policies are designed to facilitate cryptocurrency’s growth and dismissing the notion that non-policy factors related to the president would substantially impact Bitcoin’s price. Desai stated, “Only a moron would ignore these policies and attribute price fluctuations for a privately traded cryptocurrency to noneconomic matters concerning the president.” This narrative highlights the complex relationship between governmental policy and the volatile nature of cryptocurrencies.
The story was originally featured on Fortune.com
