Bitcoin and the broader cryptocurrency market experienced a sharp pullback following President Donald Trump's inauguration, tempering the industry's initial optimism about the new administration's potential impact on the sector. Bitcoin, which had soared to a record high of $109,350.72 on Monday, dropped to approximately $103,527.93 by Tuesday, reflecting a more cautious investor sentiment.
The debut of Trump-related cryptocurrencies also failed to sustain their initial momentum. The "Official Trump" token, launched shortly before his inauguration, plummeted by 26% within 24 hours, according to CoinGecko data. Similarly, a meme token tied to First Lady Melania Trump suffered a 50% price drop in its first trading day. Despite the initial buzz, the lack of concrete policy announcements dampened enthusiasm.
Crypto investors had anticipated bold moves from President Trump, who had campaigned on promises of regulatory support for digital currencies, including creating a federal Bitcoin reserve. However, his inaugural address and subsequent executive actions were notably silent on these topics, leaving the market to speculate about the administration's plans.
Kenneth Lamont, a principal at Morningstar, cautioned investors against being swept up in the hype. "If Donald Trump delivers on his election promises, we could see cryptocurrency markets continue to surge. However, investors would do well to resist the siren call of fear of missing out and sit on their hands," Lamont said.
Bitcoin's dramatic price swings underscore the volatility inherent in the cryptocurrency market. While Bitcoin's value surged to historic levels ahead of the inauguration, the retreat highlights the risks associated with speculative trading. "Fear of missing out is not an investment strategy," Lamont warned, adding that retail investors often make poorly timed decisions in such turbulent markets.
Trump's campaign rhetoric suggested a robust embrace of cryptocurrency, including a pledge to maintain a national Bitcoin stockpile as a "strategic national asset." However, no such initiative was included in his inaugural executive orders, leaving industry leaders uncertain about the administration's commitment.
Jon Ostler, CEO of financial market platform Finder, noted the president's symbolic gestures, such as launching the $TRUMP and $MELANIA tokens, could indicate long-term support for the industry. "[Crypto] is like Father Christmas-the more people that believe in it, the stronger it is," Ostler said. However, he expressed skepticism about the practicality of Trump's more ambitious promises. "It sounds cool, [but] when you get down to the nitty-gritty of how global finance works, it might grind to a halt in the Houses."
Austin Campbell, a professor at NYU's business school, pointed to the fragmented regulatory landscape as a key challenge for the industry. "I'm dealing with 50 states on a state-by-state basis that all vaguely disagree with each other about how to do things," Campbell said on Bloomberg's Odd Lots podcast. He expressed hope that federal legislation under Trump's administration could provide much-needed clarity.
The broader cryptocurrency market, as measured by the CoinDesk 20 index, also struggled to maintain Monday's gains. Altcoins, including Ethereum and XRP, mirrored Bitcoin's decline, reflecting the overall uncertainty about the administration's impact on digital assets.
Despite the initial setbacks, industry insiders remain cautiously optimistic. Trump's campaign rhetoric and the symbolic gestures surrounding his inauguration suggest a potential ally in the Oval Office. However, the absence of immediate action leaves many questions unanswered.
Market analyst Joshua Mahony summarized the mixed sentiment, stating, "Once again, Trump appears to care little for who are perceived to be allies or foes. Investors are hopeful but wary, as the lack of clarity on crypto policy casts a shadow over the market's recent gains."