Nobel laureate Paul Krugman says Bitcoin’s meltdown is deeply connected to Trump’s waning power: ‘Think of it as the unraveling of the Trump trade’

After hitting an all-time high of $126,000 last month, Bitcoin has seen a free fall over the past month, settling at around $87,000 as of Wednesday after falling to a six-month low of around $81,000 last week. The $1 trillion massive cryptocurrency sell-off has cost the Trump family — with its prolific cryptocurrency ventures — $1 billion of its fortune, according to the Bloomberg Billionaires Index.

To Krugman, who had previously been outspoken and long-winded New York Times Bitcoin’s latest defeat is a sign that Trump has lost his edge, says the columnist. Krugman points out that Trump has been a friend of the cryptocurrency industry for a long time, in addition to having significant investments in the sector.

“How should we understand Bitcoin’s recent collapse? Think of it as the unraveling of Trump’s trade,” Krugman said in a Substack post on Monday. “Trump remains more determined than ever to reward the industry that made his family rich, and those around him are more determined than ever to make America safe for predators of all kinds.

He added: “But Trump’s power is clearly diminishing, and thus the price of Bitcoin has fallen, which has actually become a bet on Trumpism.”

Krugman’s argument about the collapse of the “Trump trade.”

Krugman, who has made no secret of his disdain for cryptocurrencies (or for Trump and Trumpism), argues that their rise is closely linked to the Trump administration’s array of friendly policies and actions toward cryptocurrency investors and exchanges. This includes calling for the creation of a government reserve for Bitcoin, as well as signing an executive order in August to allow US citizens to invest retirement savings in the cryptocurrency, as well as other alternative assets. Last month, Trump pardoned Binance founder Changpeng Zhao, who in 2023 pleaded guilty to violating US money laundering laws when he was CEO of the cryptocurrency exchange.

Trump himself owns an estimated $870 million worth of Bitcoin, making him one of the largest investors in the currency, and his family has been developing its own cryptocurrency empire over the past few years. In September, American Bitcoin, a bitcoin mining company backed by Eric Trump and Donald Trump Jr., began trading on the Nasdaq and received a $5 billion valuation in its debut. A luck The analysis published in March found that Trump’s cryptocurrency holdings make up about $3 billion of his net worth.

Trump’s broader political moves have been linked to previous crypto selloffs, including last month, when the collapse coincided with the president imposing an additional 100% tariff on China.

But more recently, Krugman noted, Trump’s partisan influence has declined, as evidenced by near-unanimous bipartisan support for the release of the Epstein files, as well as a decline in Republican approval of the president’s handling of the economy following growing concern about the “K-shaped economy.” This comes on top of landslide victories achieved by Democrats at the ballot box, including the election of democratic socialist mayors in New York and Seattle.

In Krugman’s view, these electoral defeats and increasing scrutiny of Trump’s handling of the economy are weakening Republicans’ willingness to show “total obedience” to the president. He cites blogger and journalist Josh Marshall, who posited that “power is unitary,” or that weakness in any part of a president’s image translates into a public perception of weakness, which extends to his influence in the cryptocurrency sector.

“A weakened Trump will be less able to enforce his will on all fronts, including his efforts to promote cryptocurrencies,” Krugman said.

To be sure, Krugman may be generous in the amount of credit he gives Trump for his control of cryptocurrency, which operates in its own environment, and is only adjacent to those with political power. White House spokesman Khush Desai said the Trump administration is implementing policies aimed at helping the cryptocurrency thrive, and criticized the idea that non-political factors in a Trump presidency would have the power to move Bitcoin’s price.

“Only a moron would ignore these policies and attribute fluctuations in privately traded cryptocurrency prices to non-economic matters related to the president,” Desai said. luck In a statement.