The recent plunge in Bitcoin’s price is closely tied to signs of President Donald Trump’s fading political clout, argues Paul Krugman, Nobel Prize–winning economist and professor at the Graduate Center of the City University of New York.
After hitting an all-time high of $126,000 last month, Bitcoin has been in a steep decline, trading around $87,000 as of Wednesday after briefly tumbling to a six-month low near $81,000 last week. The broader $1 trillion selloff across cryptocurrencies has even dented the Trump family’s wealth: its sizable crypto-related ventures have lost an estimated $1 billion in value, according to the Bloomberg Billionaires Index.
Krugman, a former longtime New York Times columnist, sees the downturn as a barometer of Trump’s waning influence. He notes that Trump has been a reliable ally of the crypto industry and has personally invested heavily in digital assets.
“How should we understand Bitcoin’s recent crash? Think of it as the unraveling of the Trump trade,” Krugman wrote in a Substack post on Monday. “Trump remains as determined as ever to reward the industry that made his family rich, and those around him are as determined as ever to make America safe for predators of all kinds.
“But Trump’s power is visibly diminishing, so the price of Bitcoin, which has in effect become a bet on Trumpism, has plunged,” he added.
How Krugman Frames the ‘Trump Trade’ Unwinding
Krugman, a long-standing critic of both cryptocurrencies and Trump-era politics, contends that crypto’s rise has been tightly linked to a policy environment unusually favorable to the industry. He points to moves such as calls for a government Bitcoin reserve and an August executive order permitting U.S. citizens to allocate retirement savings into cryptocurrency and other alternative assets.
He also cites Trump’s decision last month to pardon Binance founder Changpeng Zhao, who in 2023 pleaded guilty to violating U.S. money laundering laws while leading the crypto exchange.
Trump himself is estimated to hold around $870 million in Bitcoin, placing him among the currency’s largest individual investors. Meanwhile, his family has steadily built out its own crypto footprint. In September, American Bitcoin—a mining company backed by Eric Trump and Donald Trump Jr.—began trading on Nasdaq and debuted with a roughly $5 billion valuation. A Fortune analysis in March estimated that crypto assets accounted for about $3 billion of Trump’s net worth.
Krugman also notes that some of Trump’s broader economic maneuvers have coincided with turbulence in digital assets. A recent crypto downturn, for example, overlapped with the president’s consideration of an additional 100% tariff on China.
Signs Trump’s Political Grip Is Slipping
More recently, Krugman argues, Trump’s partisan grip has weakened. He points to near-unanimous bipartisan support for the release of the Epstein files, softening Republican approval of Trump’s economic stewardship amid worries about a “K-shaped economy,” and a series of decisive Democratic wins at the ballot box, including the election of democratic socialist mayors in New York and Seattle.
In Krugman’s view, these developments erode Republicans’ inclination to show “lockstep obedience” to Trump. He references blogger and journalist Josh Marshall, who has argued that “power is unitary”—meaning that perceived weakness in any part of a president’s image spills over into all other domains, including financial markets and crypto policy.
“A weakened Trump is less able to work his will on all fronts, including his efforts to promote crypto,” Krugman wrote.
How Much Does Trump Really Matter for Bitcoin?
Even Krugman’s critics might agree he is assigning Trump a sizable role in a market that often moves to its own rhythms. Bitcoin and other digital currencies operate in a global ecosystem influenced by regulation, macroeconomic trends, investor sentiment, and technological shifts—not just one leader’s political fortunes.
The White House, for its part, rejects the idea that Trump’s broader political standing is the primary driver of crypto prices. Spokesperson Kush Desai said the administration’s focus is on policies designed to help cryptocurrency thrive and dismissed the notion that non-economic aspects of Trump’s presidency could explain Bitcoin’s recent volatility.
“Only a moron would ignore these policies and attribute price fluctuations for a privately traded cryptocurrency to noneconomic matters concerning the president,” Desai told Fortune in a statement.
