When policy sets the price: the collapse of Trump's Bitcoin bet

Nobel laureate economist Paul Krugman observes a troubling phenomenon in crypto markets: Bitcoin has ceased to be an independent asset and has become a pure “Trump Trade”, a mirror of political power that reflects every fluctuation of Republican control. The recent drop in the asset’s price is not a coincidence but a direct consequence of Trump’s political decline in recent weeks.

The Bitcoin nobody remembers needing

What is Bitcoin’s real utility in 2025? The uncomfortable answer is that it does not function as a daily currency. It does not protect against inflation. Nor does it act as a refuge during financial turbulence — on the contrary, its price movements are strongly correlated with tech stocks, albeit with much higher volatility.

What Bitcoin does, and what truly drives its demand, is facilitate traceless transactions. The cryptographic infrastructure backing it allows for anonymity. While not all anonymous transactions are illegal, most problematic uses are concentrated in criminal activities ranging from money laundering to financing criminal networks.

Bitcoin’s absolute anonymity creates a peculiar dilemma: the same users seeking privacy become ideal targets for criminals. Possessing the private key is like carrying a bag full of hundred-dollar bills without legal protection. This has led to a wave of kidnappings targeting high-profile crypto investors. Stories of extortionists demanding private keys have become so frequent that major Bitcoin conferences now offer specialized “anti-kidnapping” workshops, where they teach physical resistance techniques.

Predation disguised as opportunity

Beyond anonymity, Bitcoin has become a tool for financial predation. Massive promotional campaigns aimed at retail investors who do not understand the real risks are systematic. When the price rises, some profit. When it falls, most discover too late the extent of their losses.

The recent approximately 25% drop since late October is not an isolated event. It is a symptom of something deeper: the blind faith that keeps Bitcoin afloat through ordinary crises is no longer enough when political reality shifts.

Why talk about “Trump Trade”?

The Trump administration has been explicitly supportive of the crypto industry. After receiving massive contributions from the sector, it responded with pro-cryptocurrency measures. Signing an executive order allowing 401(k) retirement fund investments in crypto assets exemplifies this stance, although these investors typically are unaware of the implicit risks.

Even more revealing is the pardon of Changpeng Zhao, founder of a major crypto platform, who had been convicted of serious violations of U.S. anti-money laundering laws. This act symbolizes the administration’s intentional regulatory weakness.

The Trump government is actively dismantling financial consumer protection agencies created after the 2008 crisis. The Treasury Secretary and allied officials systematically work to weaken banking regulations that limited extreme risk behaviors. All this favors speculators and financial promoters while harming retail investors’ stability.

Political power erodes, and Bitcoin falls with it

So, why is Bitcoin falling now? Because the political power backing it is crumbling. Although Trump continues trying to compensate the industry that enriched his inner circle, his ability to control the Republican Party is notably declining.

Political metrics are clear: his net approval ratings have plummeted dramatically in the last month. Democratic electoral defeats in Virginia and New Jersey on November 4th fractured Republican discipline in Congress. Simultaneously, ongoing exposure of connections between Trump and Jeffrey Epstein has deeply eroded the MAGA base psychologically.

Many followers believed Trump was a protector against specific threats. When they realize they may have confused victim and perpetrator, the impact is catastrophic for political cohesion.

Politics and cryptocurrencies: an inevitable connection

Is it forced to link political turbulence with crypto price movements? No. Power functions as an integrated system. A weakened Trump loses the capacity to impose his will on multiple fronts simultaneously, including the active defense of the crypto industry.

Bitcoin has become an indicator of something more important than its own speculative value: it is a thermometer of real political influence. Its price decline directly reflects the weakening of Trumpist control over the Republican structure.

When the music stops, everything collapses.