Reasons behind the crypto crash with Trump as President and Paul Atkins at the SEC

The crypto crash has unfolded under Donald Trump as the president and Paul Atkins as the head of the Securities and Exchange Commission.

Crypto crash has happened under Donald Trump

Bitcoin (BTC) has already erased all the gains made during the Trump presidency and is now trading at its lowest level since October 2024. Altcoins have done worse, with some notable names like Shiba Inu and Cardano hovering near their lowest levels in 2022.

The ongoing crypto crash is ironic as the industry has some major tailwinds. President Trump is the most friendly president for the industry, while Paul Atkins has embraced a different approach than Gary Gensler.

For example, Gary Gensler ended the lawsuits against top companies like Coinbase, Uniswap, and Ripple. He also embraced a more friendly approach, including not launching any lawsuits.

Washington has also enacted some friendly regulations. It passed the GENIUS Act last year, and is now working on the CLARITY Act that will separate SEC and CFTC duties.

There are a few reasons behind the crypto market crash under Trump. Analysts cite the launch of the Official Trump meme coin as a major risk in the industry as it drained vast liquidity. The meme coin initially jumped to $50 and then plunged to below $5.

At the same time, geopolitical risks have remained elevated under Trump. It started with his global tariffs to the current war in Iran that has pushed crude oil prices to the highest level in years.

His tariffs disrupted the falling inflation and pushed the Federal Reserve to be more cautious in its monetary policy. This trend may continue in the foreseeable future as inflation is expected to rise now that the crude oil and natural gas prices have jumped by over 50% this year amid the war in Iran.

Deleveraging after the huge liquidation event in October

Crypto prices have also crashed amid his ongoing deleveraging among investors, especially after the major liquidation event that happened on October 10 last year when over 1.6 million traders were wiped out.

Over $20 billion was lost on that day. Since then, the futures open interest has tumbled to below $100 billion, while the weighted funding rate has largely moved sideways. The Crypto Fear and Greed Index has remained in the red in the past few months.

The crypto crash also happened because of the gridlock in Washington about the CLARITY Act, which has stalled in the past few months. This gridlock started when Coinbase withdrew its support, citing the view that the bill made it almost impossible for crypto companies to pay stablecoin rewards.

Banks and credit unions have argued that allowing these companies to offer rewards will drain funds from their institutions, which will affect the broader economy.