Under Trump, cryptocurrencies are set to go mainstream – but that won’t make them any safer for investors Larisa Yarovaya

AAs the United States prepares for the inauguration of Donald Trump on January 20, all eyes are on the cryptocurrency markets. after Bitcoin price reached $100,000 (£81,917) For the first time in history in December 2024, the cryptocurrency community is eagerly anticipating Trump fulfilling his campaign promise to make U.S. “Crypto Capital of the Planet”. Some analysts expect that the price of Bitcoin may range Between $78,000 and $250,000 in 2025.

Blockchain technology has many applications beyond cryptocurrency payments – for example, in supply chain and logistics. But the prices are high BitcoinEthereum and “meme coins” capture the majority of the public’s attention. Speculative demand and the potential for abnormal returns, something rarely found in other financial markets, remains the main driver of their prices.

Investors are often motivated by the prospect of short-term profits rather than belief in the true or fundamental value of the asset. In the case of meme coins, speculative demand is primarily driven by social media culture and community enthusiasm, with little focus on the usefulness of the underlying technology or the long-term success of the project.

Thanks to expectations of a more favorable regulatory environment under the Trump administration, there is now growing institutional interest in cryptocurrencies. Big players like Black Rock It enters the cryptocurrency derivatives market, increasing liquidity and attracting more investors. This industrial and political support for cryptocurrencies shows a greater adoption and acceptance of crypto assets. At the same time, the speculative nature of crypto assets raises concerns about political endorsements It can inflate the bubble, Similar to the dot-com bubble that lasted between 1998 and 2000.

Financial market bubbles occur when asset prices significantly exceed their fundamental values ​​and no longer reflect actual risks. When these bubbles burst, they can cause a Infection effectWhich led to the collapse of related securities – even in industries not directly linked to the distressed assets.

In my country researchalong with his fellow authors, I analyzed companies that have rebranded with cryptocurrency-related names to boost their stock prices, despite no changes in their business models. This superficial association has made these companies vulnerable to contagion from the broader cryptocurrency ecosystem. If investors do not investigate whether these companies have truly adopted blockchain technology, they will likely sell these stocks quickly at the first sign of negative news or crisis in the cryptocurrency market.

With increasing institutional involvement, including investment management firms and banks, other industries are becoming increasingly vulnerable to the risks of a cryptocurrency market crash, such as those caused by… Terra Luna and FTX collapse In 2022. Silicon Valley BankThe 2023 bankruptcy of SVB Bank is a prime example of how interconnected vulnerabilities in technology, venture capital and speculative markets can destabilize banks, particularly those with extensive exposure to high-risk sectors. In 2025, the threat of infection is stronger than it was in the early days when cryptocurrency markets were more isolated.

The infection flows in both directions. After the collapse of SVB, the cryptocurrency company Circle, the issuer of the popular stablecoin USDC, reported It holds $3.3 billion of its reserves in SVB. As a result, USDC temporarily lost its peg to the US dollar, as markets feared that the company would face liquidity issues, making it impossible to redeem USDC against the US dollar. This incident highlights that the close ties between the cryptocurrency sector and traditional finance increase vulnerabilities in both sectors, raising concerns about overall financial stability.

Even if supposedly stable crypto assets like USDC, Tether, and Terra Luna are not immune to decoupling or collapse, meme cryptocurrencies — driven entirely by social media hype and celebrity endorsements — are more vulnerable to speculative bubbles.

Trump ally Elon Musk has endorsed several cryptocurrencies via Twitter/X, and recently the billionaire changed his name to “Kekius Maximus” on X, causing the price of the token in question to, Kikyos, rising by more than 700%. Social media influencer Logan Paul was investigated by the BBC For endorsing many coins on his YouTube channel. Paul denies any wrongdoing.

Promotion of cryptocurrencies, particularly by influencers, is a key component of pump-and-dump schemes that involve artificially inflating the price of a currency through hype or sometimes even false information (“pumping”) and then selling large holdings at the peak, leaving other investors. Who suffered losses as prices collapsed (“dumping”). In the case of Paul and other celebrities, there are allegations of undisclosed financial interests in meme currencies. Celebrities should refrain from encouraging their followers to invest in any cryptocurrency without transparently disclosing their financial involvement – ​​especially if there are some plans to sell the asset later, which could cause financial losses to their followers.

A core part of the cryptocurrency ethos is the aspiration for financial freedom: enabling peer-to-peer transactions without relying on central banks or financial intermediaries, promoting greater financial freedom. However, it is ironic that cryptocurrency investors often blindly trust the opinions of social media influencers, investing in high-risk speculative assets that often have dire consequences for investors. During the cryptocurrency market crash of 2022, many amateur investors lost their investments and, in some cases, their savings, Which had a radical impact on their lives and mental health.

The Securities and Exchange Commission (SEC), the US financial market regulator, has launched several investigations into celebrities who promote cryptocurrencies without disclosing their financial interests in the projects. However, former SEC Chairman Gary Gensler has resigned, and Trump intends to nominate himself. Paul Atkins, a well-known cryptocurrency enthusiastTo head the Supreme Education Council.

Such changes will be welcomed by the cryptocurrency community as they may lead to higher prices of crypto assets and increased profits. At the same time, it is worrying because it may change the way regulators view and act on market manipulation and insider trading that occurs in cryptocurrency markets with the help of social media. If the SEC turns a blind eye in 2025, consumers could be left completely protected from financial losses – especially when another meme bubble bursts.

Easing cryptocurrency regulations will not advance financial freedom. Instead, it represents a major step backward in the quest for transparency and accountability in addressing financial misconduct by the rich and powerful. Ironically, strong political and governmental support for cryptocurrencies poses a threat to the spirit of decentralization and could ultimately undermine the appeal of crypto assets.

This year, the cryptocurrency market is likely to go mainstream, but those operating on the sidelines may face unmet expectations at best and challenges at worst.