The Trump Effect on Cryptocurrency Prices: When is the Best Time to Buy the Dip?

Original Title: Bitcoin Has Declined 20%. How Soon Could the BTC Price Revive?

Original Author: Steven Ehrlich

Original Translation: Bitpush News

In 2025, the Trump administration delivered a series of "gifts" to the cryptocurrency industry.

The U.S. Securities and Exchange Commission (SEC) paused enforcement actions and investigations against major cryptocurrency exchanges and companies (such as Coinbase, Gemini, Uniswap, OpenSea, ConsenSys, etc.). The White House issued an executive order aimed at boosting the U.S.'s leadership in the digital asset industry and expressed intentions to establish a Bitcoin reserve.

However, these measures were not enough to prevent the recent decline in Bitcoin's price and the overall negative sentiment in the crypto industry. As of the time of writing, the current Bitcoin price is $84,000, having fallen 18% since Donald Trump took office, nearly 23% from its all-time high, and the cryptocurrency's total market capitalization has dropped by 21%.

Kavita Gupta, Founder and General Partner of Delta Blockchain Fund, stated, "It feels like all the positive news in the cryptocurrency space has happened, and the industry's progress seems to be merely a product of a momentary enthusiasm by high-level political figures, lacking proper processes and due diligence... the situation could change at any moment, with sustainability in question."

Currently, three major forces driving the market down may further push it lower before stabilizing and beginning to recover. In fact, the crypto industry may not see sustained bullish momentum again until 2026.

Internal "Backlash"

There are many explanations for the recent decline, with the first being the behavior of cryptocurrency participants themselves.

For example, the industry found itself in an unfavorable position due to multiple meme coin dramas, such as $MELANIA and later $LIBRA, the latter even involving Argentina's President, Javier Milei, in a scandal. Now, the issuance and trading activity of meme coins in the entire industry are on the decline, raising doubts about their long-term sustainability. For instance, the peak number of new tokens issued in a day reached 66,471 on January 24, just six days after $TRUMP was launched. By February 27, the latest date for which full data is available, this number had dropped to 27,741, a 58% decrease.

GSR Research Director Brian Rudick, when discussing this data, stated: "Meme coins were once thought to be the fairest, most efficient form of speculation in the cryptocurrency space, but $LIBRA has shown that this is not the case. Now you see on-chain transaction volumes plummeting, [even though] meme coins are at the forefront, dragging down the entire cryptocurrency space."

Furthermore, the $1.5 billion hack of Bybit by North Korean hackers (the largest theft in cryptocurrency history) has once again raised questions about the safety of investing in cryptocurrency. Gupta pointed out: "These hacking incidents have led the outside world to believe that even after 10 years of development, this industry has not truly matured."

External Headwinds

All this negative sentiment within the industry is being amplified by investors' broader risk aversion.

Typically, a new government’s inauguration boosts consumer confidence, and business leaders initially welcomed Trump's election because of his pro-business mindset. However, multiple new data points show that consumer confidence is waning, possibly due to Trump's threats to impose 25% tariffs on trade partners like Canada, Mexico, and the EU.

The Conference Board's Consumer Confidence Index February report recorded its third consecutive monthly decline, hitting its lowest level since August 2021.

The University of Michigan's Consumer Sentiment Survey also shows a significant drop in consumer confidence. The report stated: "Consumer sentiment continued its decline from earlier in the month, dropping almost 10% from January. This decline is widespread across age, income, and wealth groups."

The report also mentioned: "Expectations for inflation in the next year have risen from 3.3% to 4.3%, the highest level since November 2023, and have seen abnormally large increases for two consecutive months. The current reading is well above the pre-pandemic range of 2.3%-3.0% for the past two years."

Rudick noted: "According to the latest data from the CME Fedwatch tool, the market expects two rate cuts this year. However, if these expectations are completely overshadowed by tariff issues, the traditional market's decline could surpass that of cryptocurrency."

How Low Could Bitcoin Go?

It's difficult to predict with certainty how far Bitcoin could drop from here.

Interactive Brokers Chief Strategist Steve Sosnick stated that even among commodities, Bitcoin is unique. "You know the supply and demand situations of crude oil, coffee, or cocoa. Bitcoin does not have a similar intrinsic demand. Its existence is purely for speculation or investment purposes."

However, Sosnick pointed out several technical charts that can give investors some insight into price levels to watch.

One of these charts is Bitcoin's 200-day simple moving average. At the current price, the asset is nearing its first test of this key indicator since a clear breakout in mid-October of last year. If this scenario occurs and the asset falls below $80,000, Sosnick believes the next threshold will be the "60,000 USDT high/70,000 USDT low range."

Despite investor sentiment being negative, according to the S&P 500 Volatility Index (VIX), the market has not reached a state of full-blown panic yet, with the VIX index still within a normal range over the past 12 months. Sosnick said, "The VIX has not reached extremely high levels, which suggests we may not be out of the woods yet, as rebounds often halt when the VIX spikes."

For Bitcoin, this means it may still see a decline as investors have not reached extreme levels of fear. For example, when the Bank of Japan raised interest rates and unwound yen carry trades, the VIX spiked in August; currently, the VIX is well below those levels.

Waiting for the Wind: 2026?

Given all these negative forces impacting Bitcoin's price, the cryptocurrency industry may need to wait until 2026 for Bitcoin and the entire industry to regain significant forward momentum. When asked about what types of internal or external factors could play a role in this process, the answer is twofold: strategic Bitcoin reserves or legislation definitively setting rules for the industry.

While the cryptocurrency community has been eager to build strategic Bitcoin reserves, the White House's executive order is looking to evaluate something different: a federal reserve, where the government would opt to hold Bitcoin acquired through enforcement actions rather than strategic reserves, where the government would purchase new Bitcoin. (However, many states are evaluating their own strategic reserves, though few have made meaningful progress.)

Rudick believes something akin to Bitcoin reserves could be beneficial for the industry, but it is far from guaranteed: "[Reserves have] always struck me as a low likelihood, but I do think Bitcoin easily hits $500,000. Even if we don't obtain it in the form of strategic Bitcoin reserves, I do believe the U.S. could create a sovereign wealth fund and accumulate Bitcoin."

But for Rudick, a more sustainable path of growth is enacting market structure legislation to allow regulated companies to legitimately enter the space, though he believes the industry will have to wait until next year to see meaningful progress: "[Legislation] might not happen until 2026. But in my view, [this is] so crucial because it's what institutional mass adoption needs."

As evidence, he pointed to a recent statement by Brian Moynihan, CEO of Bank of America, who said that if the industry's rules become clearer, his bank, which has been cautious about cryptocurrency, would consider launching a stablecoin. (At least one source close to Washington negotiations believes stablecoin legislation may not even be signed until 2025.)

But before that, the industry needs to stay steady to weather these adverse factors. After all, this sharp swing in investor sentiment is a big part of the risk of investing in cryptocurrency.

Sosnick summed up the current market situation in one sentence: "Market rises usually feel like taking the stairs, but when it falls, it's like taking the elevator. This time Bitcoin took the elevator to the top floor, and now it's taking the elevator back down to the basement. It's a highly volatile asset. If volatility works in your favor, that's great—everyone is happy to accept and enjoy it, but when volatility moves in the opposite direction, that's just too bad."

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