Author: Paul Krugman

Original Title: The Trump Trade is Unraveling

The Unraveling Trump Trade: Why Bitcoin’s Decline Signals Waning Political Power

Nobel laureate and New York Times columnist Paul Krugman, renowned for his staunch Keynesian perspective and incisive public policy analysis, consistently transforms complex economic mechanisms into clear societal insights, never shying away from controversial political discourse. In his latest article, dated November 24, 2025, Krugman posits a provocative argument:

Bitcoin has fundamentally transformed into a “Trump trade,” its fortunes inextricably linked to Donald Trump’s political influence. Consequently, he views Bitcoin’s recent sharp decline not as an isolated market event, but as a direct financial market reflection of Trump’s waning political power and diminishing sway.

Bitcoin’s Dubious Utility: More Predation, Less Protection

What precisely is Bitcoin’s utility? Krugman contends it fails as a true currency, lacking the fundamental characteristic of being a widely accepted medium of exchange for payments. Furthermore, it offers no reliable hedge against inflation, nor does it mitigate financial risk. On the contrary, Bitcoin’s price often moves in tandem with — and with significantly greater volatility than — AI-related stocks that have recently driven equity markets.

If Bitcoin possesses a core function, Krugman argues, it lies primarily in obfuscating financial flows. Its cryptographic nature facilitates anonymous transactions, leaving no paper trail. While not all such transactions are illicit, a substantial portion undoubtedly are.

Anonymity’s Dark Side: A Magnet for Crime

This very anonymity, however, is a double-edged sword. While it facilitates illicit activities for some crypto users, it simultaneously makes them prime targets for criminals. The holder of a Bitcoin key—the digital code unlocking the asset—is its de facto owner, regardless of identity or acquisition method. In essence, possessing a Bitcoin key is akin to holding a bag full of cash.

This characteristic has fueled a disturbing trend: a wave of kidnappings targeting major cryptocurrency investors, with perpetrators demanding the surrender of these critical keys. Such incidents have become so prevalent that a recent prominent Bitcoin conference dedicated an entire day to an “anti-kidnapping” workshop, where attendees learned survival skills like biting through restraints.

Beyond its role in facilitating crime, Bitcoin is increasingly seen by Krugman as a tool for financial predation. Cryptocurrencies—and even more precariously, shares in companies that borrow to invest in crypto—are aggressively marketed to unsophisticated investors who often fail to grasp the inherent risks. While these individuals might see gains during price surges, most likely have little understanding of the catastrophic losses they could incur during a market downturn.

The Bitcoin “Belief System” Faces a Reality Check

Indeed, the cryptocurrency market has recently experienced a significant downturn. While Bitcoin has fared better than more obscure altcoins, it has still plummeted approximately 25% since late October. Krugman acknowledges that Bitcoin might rebound, positing that it functions not merely as an asset but as a belief system.

He recounts a conversation with renowned American host and political commentator Hasan Minhaj, who, upon hearing Krugman’s criticisms of Bitcoin, immediately retorted: “I don’t want to be memed, the Bitcoin maximalists are already after me.”

This cult-like devotion often enables Bitcoin to recover from setbacks and scandals that would devastate conventional investments, as loyalists tend to double down during price dips. This time, however, might be different.

The “Trump Trade” Unmasked: A Political Bet Gone Sour

The potential for a different outcome stems from Krugman’s central contention: Bitcoin has, in essence, devolved into a “Trump trade.” Its price surge following Trump’s election victory last year, and its recent collapse, align precisely with a series of political setbacks for Trump.

Why this strong correlation? Krugman suggests it’s partly due to Trump’s reciprocal policies favoring the crypto industry, following substantial financial contributions his family has received from it. Notably, he signed an executive order permitting ordinary Americans to invest their 401(k) retirement savings into crypto assets—investments often made by individuals unaware of the inherent risks.

More broadly, Krugman argues that the Trump administration has been remarkably permissive of the financial predation that cryptocurrency increasingly embodies. Efforts have been made to dismantle institutions established in the wake of the 2008 financial crisis to protect investors and market stability, such as the Consumer Financial Protection Bureau.

Furthermore, Treasury Secretary Mnuchin and other Trump administration officials and allies—including some within the Federal Reserve—have actively sought to weaken banking regulations designed to curb the high-risk behaviors that triggered the 2008 crisis. This environment, detrimental to retail investors and financial stability, ironically benefits financial speculators and cryptocurrency proponents.

Interpreting Bitcoin’s Plunge: A Symptom of Declining Influence

How, then, should we interpret Bitcoin’s recent plunge? Krugman suggests viewing it as the unraveling of the “Trump trade.” Despite Trump’s continued efforts to reward industries that have enriched his family, and his inner circle’s persistent attempts to foster an environment ripe for various forms of predation, Trump’s power is demonstrably waning. Consequently, the price of Bitcoin, which has become a de facto wager on Trumpism, has fallen in tandem.

Why this sudden display of weakness from Trump? While polls have consistently shown low approval ratings since spring, his net approval has notably declined over the past month. Despite his recent claims of having the “highest approval ratings of his political career”—a statement whose source remains unknown—the decisive Democratic victories in Virginia and New Jersey on November 4th have unequivocally validated the surveys indicating his extreme unpopularity.

These electoral defeats have shaken the willingness of congressional Republicans to blindly follow Trump’s lead. Concurrently, the ongoing revelations regarding Trump’s association with Jeffrey Epstein are eroding his MAGA base. Many political analysts, Krugman contends, may underestimate the profound psychological impact on a significant portion of his supporters who genuinely believed Trump was protecting the world from Democratic pedophiles, only to now confront the possibility that they may have confused the hero with the villain.

Is it a stretch to connect Trump’s political predicaments with cryptocurrency prices? Krugman argues emphatically not. As Josh Marshall frequently emphasizes, power is unitary. A weakened Trump will see diminished effectiveness in his efforts across all fronts, including his endeavors to advance the cryptocurrency industry. While Krugman promises a deeper dive into the intersection of politics and crypto in future writings, his immediate reiteration is clear:

Bitcoin has become the Trump trade, and its falling price is a direct indicator of Trump’s diminishing control over the Republican party.

(The above content has been excerpted and reproduced with authorization from partner PANews. Original Link | Source: Bitpush)