Trump’s Art of the (Crypto) Deal

In 2021, the crypto industry suffered what analysts dubbed its “Great Recession.” The price of Bitcoin and other digital assets plummeted, wiping out billions of dollars in wealth. High-flying companies collapsed, top executives went to prison, and regulators cracked down on what they saw as a reckless financial experiment.

And yet, the broader economy barely flinched. Unlike the 2008 financial crisis, when the collapse of mortgage-backed securities crippled the banking system, the crypto crash was largely contained within the industry. Most Americans didn’t own any crypto, and those who did were often speculators willing to take the risk.

But that could soon change.

Donald Trump, now in his second term, has become the most pro-crypto president in since the digital coin came to limelight. His policies are poised to bring digital currencies into the financial mainstream, exposing millions of Americans, and even the federal government, to the wild swings of a highly volatile industry.

Here’s how.

Three days before his inauguration, Trump launched his own cryptocurrency: a memecoin called $Trump. Memecoins, like Dogecoin or PepeCoin, are joke currencies with no real-world utility. Their value is based entirely on hype, and Trump , through his vast online following, had the perfect platform to fuel speculation.

His supporters rushed in, sending the coin’s price soaring. The Trump family raked in millions in fees. But the crash came swiftly: within 24 hours, $Trump lost 60% of its value.

A forensic analysis of the coin’s buyers revealed that many were first-time investors who had never owned crypto before. They saw the former president’s involvement as a stamp of legitimacy, only to watch their savings disappear in a market crash.

The incident echoed one of crypto’s most infamous episodes: the rise and fall of the Squid Game token in 2021. Named after the popular Netflix show, the token surged by 75,000% in just a few days before developers abandoned it, stealing millions from unsuspecting investors.

With Trump openly endorsing speculative crypto projects, the risks to ordinary Americans are growing.

During Biden’s presidency, the Securities and Exchange Commission (SEC) took an aggressive stance against crypto fraud. It filed lawsuits against major exchanges like Binance and Coinbase, arguing that crypto assets should be regulated like stocks and bonds.

The rationale was simple: traditional financial markets have safeguards. When you buy a stock, the company is required to disclose financial statements, executives must be vetted, and price manipulation is illegal. In crypto, many of these protections don’t exist.

Trump, however, has promised to end the government’s so-called “war on crypto.” His allies in Congress are working to shift regulatory oversight from the SEC to the Commodity Futures Trading Commission (CFTC), a much smaller agency with fewer enforcement powers.

This could have two major consequences:

1. Scammers will have more room to operate. The SEC has shut down hundreds of fraudulent crypto schemes, but a weakened regulatory environment could encourage more bad actors to enter the space. In 2022 alone, crypto scams and hacks drained $3.9 billion from investors.
2. Traditional banks could bring crypto to everyday investors. Right now, buying Bitcoin requires setting up a digital wallet and navigating decentralized exchanges. But if major financial institutions gain approval to bundle crypto into retirement funds, pension plans, and college savings accounts, millions of Americans could unwittingly have exposure to a highly volatile asset.

Wall Street firms have already made progress in this direction. In early 2024, the SEC reluctantly approved Bitcoin ETFs, allowing traditional investors to buy shares tied to Bitcoin without holding the currency itself. Trump’s policies could expand this model to even riskier digital assets.

Perhaps the most radical aspect of Trump’s crypto agenda is his proposal to create a “national Bitcoin stockpile.”

The idea is inspired by how the U.S. manages its oil and gold reserves. In times of crisis, the government releases oil from its Strategic Petroleum Reserve to stabilize fuel prices. Gold, stored at Fort Knox, underpins financial stability.

Crypto executives now argue that Bitcoin should be treated the same way. Their logic? If Bitcoin continues to appreciate, holding it as a national asset could help reduce the $36 trillion national debt. If digital currencies replace the dollar in global trade, the U.S. would maintain economic dominance.

But there’s a glaring flaw in this plan: Bitcoin is not a stable asset. Unlike gold or oil, which have intrinsic value, Bitcoin is worth only what the market says it is. Its price has experienced multiple 50%-plus crashes in just the past five years.

Imagine if, instead of gold, the U.S. government had invested in Beanie Babies during the 1990s craze, or in dot-com stocks before the 2000 crash. Holding Bitcoin in federal reserves could be just as reckless.

If Trump’s policies succeed in making crypto mainstream, the stakes of the next market crash will be far higher than in 2021.

• More Americans will own crypto, meaning a market downturn could wipe out household savings, just as the subprime mortgage crisis did in 2008.
• Retirement and investment funds could be hit, causing ripple effects in traditional financial markets.
• If the government holds Bitcoin, a price collapse could destabilize national finances.

In 2008, reckless speculation in the housing market nearly brought down the global economy. The U.S. government had to bail out banks, mortgage lenders, and even car manufacturers to prevent a total collapse.

Now, imagine a future where Washington is holding billions in Bitcoin reserves, pensions are tied to crypto, and retail investors have sunk their savings into speculative tokens. The next crash wouldn’t just hurt crypto traders, it could shake the entire economy.

Crypto is an innovation with potential. But Trump’s push to integrate it into the financial mainstream is a high-stakes gamble. History has shown that when speculative assets become too deeply embedded in the economy, the fallout from their crashes can be catastrophic.

If Trump truly wants to champion crypto, he should focus on creating safeguards, not stripping them away. Because without the right guardrails, the next crypto crash won’t just be a cautionary tale for traders. It could be a financial crisis for everyone, whether American or not.