The declining approval rating of Donald Trump will affect his family businesses, a Nobel Prize winner has claimed.
Paul Krugman believes the negative effects of the president’s approval ratings will cause a collapse in the crypto market, which received a surge in the post-election space. Trump had backed a cryptocurrency, $Trump, and has taken actions in office to inflate the value. Top holders of share price in the coin, for instance, were invited to a dinner with the president as a result of their investment.
Despite the boom in interest following Trump’s return to office, confidence is waning as his approval rating declines. Economist Krugman believes there is no coming back for the crypto business.
He wrote in his Substack, “But there was also a huge financial payoff: Crypto-friendly policies and the perception that the U.S. government would actively promote crypto assets helped fuel a huge rise in the prices of Bitcoin and other assets.
“The chart at the top shows that a large part of the rise in crypto values since the previous crypto winter came in a post-election surge. As I wrote last October, crypto has become a Trump trade.
“Now almost all of that surge is gone. Bitcoin sold for about $69,000 just before the 2024 election; it reached a peak of almost $125,000; but just before this post went live it was under $71,000.
“How much of that reversal reflects Trump’s cratering approval and doubts about whether he can or will deliver the crypto-friendly policies the industry wants? It must be part of the story. And crypto is unlikely to regain the level of political influence it had a few months ago.”
Krugman also criticized the claims of Michal Burry, the investor who predicted and profited from the subprime mortgage crisis. Burry believes there will be a “death spiral” when it comes to asset prices should Bitcoin continue declining.
Krugman disagrees, writing, “I think this is exaggerated: Crypto is still a fairly small piece of financial markets, and, without getting into too much detail, crypto hoarders like Strategy may eventually be forced to sell, but they won’t be facing immediate margin calls.
“In fact, if we’re going to have a crypto crash, best to get it over with now, before the industry becomes too big — or too politically powerful — to fail.”
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