Gate.io Blog "Trump Trade" Fails, What Will Happen to the Crypto Market?

"Trump Trade" Fails, What Will Happen to the Crypto Market?

16 January 14:55

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 ![](https://gimg2.gateimg.com/image/article/1737010165newindustryanalysis.jpeg)
##  [TL；DR]: 
As Trump is about to officially take office as the US President, the "Trump Trade" that has been intertwined in the market for a long time has shown a downward trend, and the prices of mainstream cryptocurrencies such as <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> have fallen since December last year.

The market's uncertainty about implementing Trump's new policies, market liquidity overdraft and changes in the global economic situation have jointly led to the failure of "Trump Trade" 2.0, and <a href="/price" target="_blank" class="blog_inner_link">crypto prices</a> have subsequently fallen.

Although the "Trump Trade" has failed, the <a href="/price" target="_blank" class="blog_inner_link">crypto market</a> still has potential. New technologies such as AI, RWA, and PayFi broaden the application scenarios of crypto, the influx of institutional participants in spot ETFs, and the recovery of market sentiment after Trump's inauguration may bring new growth points and investment opportunities to the crypto market.

## Introduction
Since the 2024 US election warm-up and the announcement of the results, the crypto market has experienced a significant wave of fluctuations around the "Trump Trade." In particular, at the end of last year, Trump's victory once stimulated market <a href="/price/optimism-op" target="_blank" class="blog_inner_link">optimism</a> and pushed Bitcoin to break through $100,000. However, with the change in policy expectations and the market's reassessment of the "Trump Trade", crypto prices began to fall.

This article aims to explore the reasons behind this phenomenon in depth and look forward to new driving factors that the crypto market may usher in in the future.
 
## “Trump Trade” Failed as Crypto Markets Weaken
The crypto market has experienced significant volatility and weakness recently. According to the latest data, the prices of mainstream cryptocurrencies such as Bitcoin have fallen significantly since December last year.

Take Bitcoin as an example. After Trump won the election, Bitcoin once broke through the $100,000 mark. After repeatedly rising and falling around this psychological price, it has recently fallen continuously and once plunged to $91,200, bringing down the short-lived Alt Season in November last year. Investor sentiment has become cautious.
 ![](https://gimg2.gateimg.com/image/article/17370103581.jpeg)
Source: Gate.io 
 
One of the reasons the market attributes the weakness of the crypto market is the suspension of the "Trump Trade." The so-called "Trump Trade" is not a new concept. It can be traced back to when Trump was first elected US president in 2016. At that time, the market generally expected Trump to launch a series of policies conducive to the business environment and economic growth, such as tax cuts, deregulation, and increased infrastructure spending. These expectations have driven up assets such as U.S. stocks and cryptocurrencies, forming the so-called "Trump Trade."

However, looking back at Trump’s first term (2016-2020), the “Trump Trade” did not work out as expected. Although U.S. stocks did rise after Trump’s victory, this rise was more due to the strong performance of technology stocks rather than the overall economic growth driven by Trump’s policies. At the same time, assets such as the U.S. dollar and small-cap stocks did not perform as expected and even fell in some periods.

Since the 2024 US election, the market's expectations for the "Trump Trade" have experienced many ups and downs. In the early days of the election results, the market expected Trump to introduce a series of policies conducive to economic growth and market prosperity, thereby driving the rise of risky assets such as cryptocurrencies. However, after a brief rise, the market ushered in a wave of deep declines, especially altcoins, which recorded their worst performance ever in the adjustment after the US election.
 ![](https://gimg2.gateimg.com/image/article/17370103872.jpeg)
Source: VanEck
 
In short, with the gradual implementation of Trump’s new policies and the adjustment of market expectations, especially when the market began to question the actual effects of Trump’s policies, the enthusiasm for “Trump Trade” gradually faded, and the crypto market prices declined accordingly.
 
## The Economic Policy Behind the “Trump Trade”
As mentioned above, when we look back at the market performance when Trump was first elected president, we can see the significant impact of the "Trump Trade" on the market. After Trump won the last term, the U.S. stock market and the crypto market rose sharply, thanks to the market's optimistic expectations of Trump's policies that would benefit economic prosperity, such as deregulation, tax cuts, and increased infrastructure spending.
 ![](https://gimg2.gateimg.com/image/article/17370104093.jpeg)
Source: Bloomberg Finance

Combined with the policy drivers of the last presidential term, the main reasons behind the "Trump Trade" are as follows:

Deregulation: The Trump administration has pledged to reduce regulatory burdens on businesses and improve market efficiency. This policy is expected to help stimulate business vitality and promote economic growth.

Tax cut policy: The tax cut policy introduced by Trump is believed to increase the disposable income of businesses and individuals and promote consumption and investment activities.

Increase infrastructure spending: The Trump administration plans to increase investment in infrastructure to stimulate economic growth and create jobs. This policy expectation will help boost market confidence and economic vitality.

Of course, there are no two identical leaves in the world. As Trump is about to take office again, the "Trump Trade" 2.0 is facing new changes in the market environment and has shown signs of suspension.

Uncertainty in policy implementation: Trump’s series of crypto policies will be affected by various factors, such as Congress, the Supreme Court, and the international situation, resulting in greater uncertainty in implementing the promised large-scale crypto policies. This uncertainty makes it difficult for investors to accurately predict the impact of policies on the market, thereby reducing the attractiveness of the “Trump Trade.”

Overdraft of market liquidity: In recent years, the crypto market has developed rapidly and become investors' focus. The crypto market has higher volatility and potential returns than traditional financial markets. However, as the inflow of spot ETF funds slows down, without more positive stimulation, the reduction or even loss of such liquidity will gradually weaken the market's attention to the "Trump Trade."

Changes in the global economic situation: Changes in the global economic situation have also impacted the "Trump Trade." With the deepening of global economic integration and changes in the international trade environment, investors have begun to pay more attention to the impact of factors such as the global economic situation and geopolitical risks on the market.

Although these factors are often not directly related to Trump's policies, they have weakened people's expectations and attention to this effect in the current complex and chaotic macro-environment.
 
## After the Failure of "Trump Trade" 2.0, What Will Happen to the Crypto Market?
With the recent release of US economic data and changes in the Fed's policy expectations, the failure of "Trump Trade" 2.0 has become a fact. Market expectations for Trump's new policies have gradually cooled, and investors have begun to re-evaluate asset allocations, including Bitcoin. As Sherwood News pointed out, "Trump Trade" refers to the market's immediate reaction after Trump's victory rather than a sustainable, long-term investment strategy.
 ![](https://gimg2.gateimg.com/image/article/17370104584.jpeg)
Source: @blknoiz06
 
After suspending the "Trump Trade," the crypto market needs to find new drivers. From the perspective of macroeconomic indicators, the US economy still maintains a strong growth trend. The recently released ISM manufacturing and non-manufacturing purchasing managers' indexes have continued to rise, indicating that the US economic outlook is relatively positive in the short term. At the same time, the job market disclosed last Friday also performed strongly, with non-farm employment data exceeding expectations and the unemployment rate declining.
 ![](https://gimg2.gateimg.com/image/article/17370104745.jpeg)
Source: Gate.io
 
These data together have led the market to expect the Federal Reserve to suspend interest rate cuts at its interest rate meeting at the end of this month and significantly delay the timing and probability of interest rate cuts this year.

However, after the end of the "Trump Trade," the crypto market still has some potential driving factors to maintain stable growth. For example, the newly added AI, RWA, and PayFi in this bull market have broadened the application scenarios and integration trends of crypto technology, bringing new growth points and investment opportunities. For example, the influx of institutional participants in spot ETFs may drive more countries and regions to establish crypto asset reserves, and the recovery of market sentiment after Trump’s inauguration will drive greater value discovery of Bitcoin.

To sum up, the failure of the "Trump Trade" does reflect the complex situation currently facing the crypto market, but it also shows that Bitcoin has been involved in the trend of global market integration. From this perspective, there is still a huge future ahead for the crypto market.

<div class="blog-details-info">
<div>Author:**Charle Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions. All investments carry inherent risks; prudent decision-making is essential.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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TL；DR

Introduction

“Trump Trade” Failed as Crypto Markets Weaken

The Economic Policy Behind the “Trump Trade”

After the Failure of "Trump Trade" 2.0, What Will Happen to the Crypto Market?

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"Trump Trade" Fails, What Will Happen to the Crypto Market?

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