For cryptocurrency investors, Donald Trump represents a great hope. In the libertarian paradise where tokens on blockchains pave the future of the financial system instead of banks, lenders, and brokerages, Trump could even be a prophet.
Trump has cleared the way for Bitcoin, Ethereum, and coins with names you’ve never heard of to go to the metaphorical moon. He has promised to kneecap the U.S. Securities and Exchange Commission, which is tasked with reining in fraud on the traditional markets and was getting more comfortable with calling a spade a spade when cryptos acted like equities or trading platforms mimicked the highly regulated function of brokers.
Earlier this week, Trump announced a “Crypto Strategic Reserve” in which the government would presumably use taxpayer money to buy and hold various cryptocurrencies. And on Friday, the White House will hold a crypto summit hosted by Trump’s AI and crypto czar, the venture capitalist David Sacks.
But one thing is holding him back from being a savior of decentralized finance: tariffs. (Well, really it’s his entire economic plan.)
On Tuesday, tariffs went into effect on goods from China as well as neighbors Canada and Mexico. Not only did the traditional markets falter with the Dow Jones Industrial Average falling 1.3% and the S&P 500 dropping 1% as of midday, but the crypto markets took a hit too. The price of Bitcoin fell 1% and Ethereum dropped 1.2%. The Dow and Bitcoin have each erased all of their respective gains since Trump was elected in November.
If you’re wondering if that’s a coincidence that the crypto market is moving in tandem with the stock market, it’s not.
Cryptocurrency was long hailed as a hedge against inflation. So the theory goes: If the economy suffers, the price of goods will go up and the buying power of the U.S. dollar, the world’s reserve currency, will go down. In that scenario, it’d be nice to have some alternative asset like precious metals or a digital currency that can bear the brunt of—or even thrive during—the hard times.
But Bitcoin and its peers became so popular in the mid-2010s that investors bought up a lot of it. Treasuries at companies like Microstrategy and Tesla hold billions of dollars in Bitcoin, crypto hedge funds abound, and there are even ways for retail investors to buy crypto on traditional markets such as through Bitcoin ETFs and even in their retirement plans. This intermingling often means that when traditional assets suffer, investors sell crypto and when crypto assets suffer, investors sell traditional assets. Their fates are intertwined.
So, when Donald Trump announced his tariffs, both the stock market and the crypto market suffered. In other words, Trump cannot inflict pain on the stock market without sending those shockwaves through the crypto world too.
That’s why his laissez-faire approach to digital assets won’t work—until he gets out of his own way, stops picking fights with neighbors and key trading partners, and does something that will actually improve the economy. Unless he does that, Kamala Harris will have been the better pick for the industry, even if she placed a cop on the beat.
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