Crypto suffers £1bn slump as ‘Trump bump’ fades

Donald Trump has been crypto-friendly in his second term, despite previously calling digital currencies a ‘scam’ - Kevin Wurm/Reuters

Traders have seen $1.5bn (£1.1bn) of cryptocurrency bets wiped out by a slump in prices, as a rally fuelled by Donald Trump’s embrace of the digital coin industry hit the rocks.

Bitcoin declined by as much as 2.9pc to less than $112,000 on Monday, while Ether, the second-largest token, dropped by around 9pc to $4,075 after bets on higher prices went sour.

Falling prices wiped out $1.5bn of bets made with borrowed money for more than 407,000 traders, according to data from Coinglass. Traders can be forced to liquidate their positions when losses exceed set levels in what is known as a margin call.

The sell-off dragged the overall size of the cryptocurrency market below $4tn, according to data from CoinGecko. Crypto exchange Coinbase slumped 2.7pc in premarket trading in New York.

Mr Trump once called cryptocurrencies a “scam”, but has adopted a far more crypto-friendly tone in his second term.

He and his wife, Melania, have launched their own “memecoins” and Trump Media and Technology, the company which owns the president’s social media platform Truth Social, has also signed a multibillion-dollar deal with the Crypto.com exchange.

Since returning to power, the Trump administration has also instituted a series of pro-crypto policies, including establishing a “strategic Bitcoin reserve” and dropping a series of lawsuits against crypto companies.

Congress has passed laws allowing banks to issue so-called “stablecoins”, which are cryptocurrencies tied to the value of assets such as bonds or currencies. The president has also said that pension funds should be able to invest in cryptocurrency.

Bitcoin has repeatedly hit all-time highs since Mr Trump’s election victory and last month reached $120,000 for the first time – double its price a year earlier. The broader cryptocurrency market has also rallied strongly.Donald Trump Jr speaks at a Bitcoin conference in Las Vegas. The Trump family has made billions from a series of crypto ventures - Caroline Brehman/EPA-EFE/Shutterstock

Edouard Hindi, chief investment officer at alternative asset manager Tyr Capital, said prices were now falling back amid concern that both assets and companies in the sector were overvalued.

He said: “You could just feel that there was something growing. You noticed less buying of these [digital asset treasury companies] and Bitcoin and Ether, the market froze, liquidity dropped and a couple [of investors] liquidated their positions overnight.”

Digital asset treasury companies are businesses that hold large amounts of cryptocurrency in reserve. They have faced accusations that their valuations had become too steep.

Mr Hindi added: “It didn’t make sense. That premia was a bit too high and the whole thing has started to unwind in the last 10 days.”

The Trump family has made billions from a series of crypto ventures, with two of the family’s crypto investments valued at a combined $6.5bn earlier this month. It is more than they have ever made from generations in the real-estate business.

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