Crypto’s MAGA bubble deflates as Bitcoin and political hype deflate

Key topics:Bitcoin, crypto stocks fall as MAGA political hype fades.Elite investors cash out amid slow ETF flows, market drop.Political shifts reshape crypto narratives, affecting public trust..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Lionel Laurent.What’s wrong with crypto? Bitcoin is down 25% since October to less than $100,000, underperforming gold and equities, while crypto stocks Circle Internet Group Inc. and Bullish have also fallen from their highs. Risk appetite is depressed, long-time holders are cashing out and flows into exchange-traded funds are slowing. The hype over corporate buyers of Bitcoin is also deflating, with some starting to sell..Perhaps one answer lies in US politics. Last year’s election of Donald Trump was the game-changer that first took Bitcoin above $100,000, as he rode a wave of high expectations — and big donations — promising to make America the “crypto capital of the world” by rolling back regulation and injecting digital assets into the machinery of state. It may be no coincidence that political and market bubbles are popping together in the wake of electoral setbacks for MAGA, including Zohran Mamdani’s New York success railing against wealthy elites in a city vying to be a crypto hub.Like a Faustian bargain, the crypto-MAGA alignment has been costly. Digital-asset entrepreneurs expecting Trump to avenge the supposed regulatory abuses of the past have only been half repaid, with pro-stablecoin rules and a more lenient enforcement approach yet to deliver a full regulatory overhaul or government Bitcoin purchases. Worse, a supposed people-power trade has looked more like an extension of the swamp. The Trumps’ fortune has grown thanks to crypto ventures worth more than $1 billion while ordinary Americans struggle; other moves, including the pardoning of crypto billionaire Changpeng Zhao, or the Winklevoss twins’ donation to the White House ballroom, complete the picture of a digital gilded age.This is political kryptonite in a K-shaped economy that has voters blaming the Trump administration for failing to tackle inflation and inequality, a topic that helped Mamdani beat (crypto-backed) rival Andrew Cuomo for the New York mayoralty. Crypto may not be a wedge issue, but it is an elite pursuit: Around one in seven Americans report owning crypto, while Bitcoin’s distribution shows fewer than 10% of addresses hold more than 98% of all tokens. A Republican course correction or a drubbing in next year’s midterm elections could slam the brakes on pro-crypto policies, with Democrats already concerned about corruption and consumer harm from ineffective regulation.Such a political backdrop is perhaps one reason why long-time HODLers are voting with their wallets, offloading around $45 billion worth of Bitcoin over the past month. Crypto elites’ defense of capitalism and attacks on alleged currency debasement are struggling to be heard above the din of voter disapproval and demand for more immediate solutions to rising grocery bills. Bettors on Polymarket, a crypto platform that predicted Trump’s win last year, expect Democrats to win the House of Representatives next year. Tech bros are running scared, realizing that unaffordable housing has become more of a vote-grabber than de-banked entrepreneurs.Of course, it’s too early to write crypto’s political obituary based on one good night for the Democrats. Money talks, and the crypto industry still has a lot of it, with a campaign war chest of around $263 million ready to influence the midterms. Going full tilt against this industry would be an expensive endeavor, however outraged Americans are about the wealth gap. Still, when pricing assets with no intrinsic value, narratives matter. The stories being told about Bitcoin this year, from its safe-haven status to its store of value, have lost their mojo. Now the MAGA narrative, reminiscent of the pro-silver populism that fired up the 1896 election, is unraveling. Bitcoin’s hydra has shown a remarkable ability to sprout two new narratives for every one that dies. But for now, it’s headless..© 2025 Bloomberg L.P.

Crypto’s MAGA bubble deflates as Bitcoin and political hype deflate

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