Down 1/3 in the first minute after opening, halved in 26 minutes, "Trump concept" dumped by the market

Cryptocurrency projects associated with the Trump family were once market darlings, but are now experiencing a dramatic collapse in trust.

Written by: Bao Yilong

Source: Wallstreetcn

On Tuesday this week, crypto mining company American Bitcoin saw its stock price plummet by 33% at 9:31 a.m.—just one minute after the market opened. Panic quickly spread, with the drop widening to 42% five minutes later. By 9:56 a.m., the stock had been “halved,” with a decline of over 50%.

In response to the cliff-like drop in American Bitcoin’s stock price, company co-founder Eric Trump posted on social media on Tuesday, attributing the fall to the end of the stock lock-up period rather than any fundamental issues with the company. He wrote:

Our fundamentals are nearly unmatched.

Although American Bitcoin’s stock rebounded somewhat on Wednesday, the entire “Trump-themed” crypto sector is experiencing significant sell-offs.

American Bitcoin stock price plummets from its peak

World Liberty Financial, co-founded by President Trump and his son, saw its token WLFI drop 51% from its early September high. The stock price of Alt5 Sigma, once promoted by Trump’s sons, has plunged 85% from its yearly peak.

In addition, “Meme coins” named after Trump and his wife Melania have seen their prices fall by about 90% and 99% respectively from their all-time highs in January.

Once, Trump’s endorsement served as a catalyst for rising crypto token prices, but now the “Trump premium” supporting these speculative assets has quickly turned into a “Trump drag.”

The “Trump Premium” Has Become a “Trump Drag”

Earlier this year, Trump’s embrace of crypto technology seemed sufficient to make digital tokens a reliable component of the financial system. Many crypto believers thought Trump had enough power to ensure the success of the projects he cared most about.

For a time, various cross-promotions seemed to work. When Gryphon Digital announced in May that it would merge with Eric Trump’s American Bitcoin, its stock price soared 173%. On the first trading day after the merger, American Bitcoin’s stock rose another 16%.

These projects all benefited from policies and regulatory changes pushed by Trump, including legislation aimed at bringing dollar-pegged crypto stablecoins into the mainstream.

But the prices of digital tokens promoted by Trump have shifted from being a symbol of political success to a burden. Hilary Allen, a professor at American University Washington College of Law, commented:

President Trump’s term is a double-edged sword for the credibility of these projects.

She added:

Trump started launching his own crypto projects, many of which quickly depreciated. If the goal was to win credibility for these projects through the Trump family, it may have backfired.

Long-term crypto investor Michael Terpin said the tariff moves serve as a reminder:

Trump can give, and he can take away.

Retail Investors Bear the Biggest Losses

Since October, this downturn has reduced the wealth created by the Trump family through its crypto businesses and other ventures by more than 1.1 billions USD. However, according to the Bloomberg Billionaires Index, they still enjoy considerable profits.

The real pain of this collapse has been felt by retail investors who entered the market when asset prices were near their peaks.

Kevin Hu, a 22-year-old student from Vancouver, bet that the market would continue to rise, but by mid-November, the value of his digital token portfolio had dropped by as much as 40%.

He said:

I thought that with the president’s support, there would be a bottom for these cryptocurrencies, but the market didn’t respond that way.

Although Trump himself has recently downplayed his public promotion of cryptocurrencies, on Tuesday, as American Bitcoin struggled, bitcoin had its best day in weeks, rising about 6%, highlighting the divergence between Trump-themed assets and the mainstream crypto market.