Traders Lose Billions as Trump Crypto Rally Collapses

A sudden sell-off in the cryptocurrency market has wiped $1.5bn in leveraged bets, as investors who once rode a wave of optimism tied to Donald Trump’s pro-crypto stance now face heavy losses. Bitcoin slid by as much as 2.9pc to fall below $112,000 on Monday, while Ether plunged around 9pc to $4,075. This downturn follows a string of bullish months, during which the value of Bitcoin doubled year on year, topping $120,000 only weeks earlier.

The reversal has seen over 407,000 traders forced to liquidate their positions – margin calls abound as losses breach critical thresholds. Credit for this volatile episode goes not only to shifting investor sentiment but also to mounting concerns that valuations across digital asset businesses had become unsustainably rich. The broader market has similarly contracted, dropping beneath $4tn in total value according to CoinGecko data. Crypto exchange Coinbase mirrored this trend, slumping 2.7pc in premarket trading.

Donald Trump, who once branded digital currencies a ‘scam’, has recast himself as a champion of cryptocurrency in his second term. Policies have become markedly crypto-friendly: lawsuits against major crypto firms have evaporated, the creation of a “strategic Bitcoin reserve” has been announced, and legislation now allows banks to issue stablecoins. Pension funds are now also permitted to invest in cryptocurrencies, cementing digital assets as a mainstream consideration for institutional investors.

Much of this renewed vigour stems from the Trump family’s own ventures. Their cryptocurrency projects have yielded billions, with two investments recently valued at a combined $6.5bn—surpassing returns from generations in property. Melania Trump and the family have even launched “memecoins”, and Trump Media and Technology has entered into a multi-billion-dollar partnership with Crypto.com in a clear statement of intent.

This optimism has not been without backlash. Edouard Hindi, chief investment officer at Tyr Capital, notes that the exuberance seemed unsustainable: “That premia was a bit too high and the whole thing has started to unwind in the last 10 days.” Digital asset treasury companies, which maintain large cryptocurrency reserves, have particularly felt the scepticism over their valuations.

While investors process their losses, regulators are taking note. The UK government has signalled an intent to match US advances in crypto regulation, launching a new taskforce dedicated to fostering collaboration and streamlining oversight of digital assets. Calls from industry leaders highlight the risk of Britain falling behind in this rapidly evolving sector.

The cryptocurrency landscape remains in flux, shaped by political winds and investor conviction alike. Despite recent setbacks, the debate over the future of digital money looks set to continue.