As the United States gears up for Donald Trump’s inauguration on January 20, 2025, the cryptocurrency markets are squarely in the spotlight. The buzz around Bitcoin, especially after it skyrocketed past the $100,000 mark for the first time in December 2024, has investors and crypto enthusiasts on edge. Donald Trump’s promise to establish the U.S. as the “crypto capital of the planet” has only added fuel to the fire. Experts are speculating wildly about what’s next, with predictions for Bitcoin ranging from $78,000 to an incredible $250,000 throughout 2025.
Blockchain technology isn’t just making waves in crypto transactions; its potential extends to areas like supply chain management and logistics. Still, what grabs headlines are Bitcoin, Ethereum, and the rising phenomenon of “meme coins.” This attention is mostly due to their dramatic price swings and the allure of outsized returns that traditional financial markets rarely offer.
The driving force behind many investors is the tantalizing prospect of quick profits rather than a conviction in the asset’s core value. For meme coins, this speculative rush is often propelled by social media hype and community excitement, with little regard for the technology’s usefulness or the long-term vision of the projects.
With Trump at the helm, hopes for a friendlier regulatory environment are stoking institutional interest in cryptocurrencies. Big names like BlackRock are dipping their toes into the crypto derivatives market, which boosts liquidity and attracts more players. This political and business backing signals wider acceptance of cryptocurrencies. However, it does raise alarm bells about the possibility of a bubble, reminiscent of the late 1990s dot-com boom.
Bubbles arise when asset prices become untethered from their fundamental values, no longer reflecting actual risks. When these bubbles pop, they can cause a domino effect, impacting even those industries seemingly unrelated to the affected assets.
In collaboration with other researchers, I’ve looked into companies that have revamped their brands with a crypto twist, seeking to inflate their stock prices without any true business transformation. Such superficial ties to crypto have made these firms vulnerable to the broader market’s ups and downs. If investors don’t do their homework and verify a company’s actual blockchain engagement, a whiff of bad news or market panic could lead to a rapid sell-off.
As more institutions, including investment firms and banks, plunge into cryptocurrencies, the interconnections and potential risks grow larger. We saw how this unfolded with the collapses of Terra Luna and FTX in 2022. The bankruptcy of Silicon Valley Bank in 2023 is a case in point, showing how fragile these interlinks between tech, venture capital, and speculative markets can be. The threat of contagion looms larger now than it did in the early, more isolated days of cryptocurrency.
The contagion isn’t one-sided. Following the collapse of SVB, Circle—issuers of the popular stablecoin USDC—announced it had $3.3 billion of its reserves tied up in SVB, which led to USDC temporarily losing its dollar peg. Markets feared the company might face liquidity troubles, potentially making it hard for investors to convert USDC back into dollars. This episode underscores how deeply interconnected the crypto world has become with mainstream finance, heightening vulnerabilities across both realms and stirring concerns about financial stability.
Even so-called stable assets like USDC, Tether, and Terra Luna aren’t immune to losing their pegs or collapsing, which makes meme coins—primarily driven by hype and celebrity endorsements—especially prone to speculative bubbles.
Elon Musk, a known Trump supporter, has taken to promoting various meme coins on Twitter (or X), recently adopting the moniker “Kekius Maximus,” which led to a 700% jump in the token Kekius’s price. Meanwhile, influencer Logan Paul faced scrutiny from the BBC for his role in promoting multiple meme coins on YouTube, though he has denied any wrongdoing.
Such crypto promotion, especially by influential personalities, is a hallmark of pump-and-dump schemes. These involve pushing coin prices up through hype or sometimes misinformation (“pump”), followed by selling off holdings when prices peak, leaving others in the lurch as prices plummet (“dump”). Questions have been raised about some celebrities’ undisclosed financial stakes in these meme coins. It’s crucial they disclose any financial ties to cryptocurrencies they’re promoting, especially if they’re planning to cash out later, risking losses for their followers.
The heart of the crypto movement is the dream of financial independence: peer-to-peer transactions without reliance on big banks or intermediaries, moving toward greater economic freedom. Yet, paradoxically, many crypto investors seem to place too much faith in the opinions of social media influencers, often diving into high-risk ventures with devastating consequences. During the crypto crash of 2022, many newbies saw their investments wiped out, sometimes losing life savings, with severe impacts on their financial and mental wellbeing.
The U.S. Securities and Exchange Commission (SEC) has been probing celebrity promotions of cryptocurrencies that lacked transparency over financial interests. That could change with Trump’s planned nomination of Paul Atkins, a crypto enthusiast, to lead the SEC after Gary Gensler’s resignation.
Such a shift would be music to the ears of the crypto community, potentially driving crypto asset prices and profits higher. Yet, it raises serious concerns about lax regulation regarding market manipulation and insider trading within crypto markets, often fueled by social media. If, come 2025, the SEC turns a blind eye, consumers face exposure to potential financial pitfalls, especially when the next meme coin bubble pops.
Easing crypto regulations could derail efforts towards true financial liberation. It risks diluting transparency and accountability in handling financial misconduct by influential figures. Ironically, strong endorsements from governments and politicians threaten the decentralization ethos that makes cryptocurrencies appealing in the first place.
As this year unfolds, the crypto market may well become part of the mainstream fabric. However, those venturing into its more speculative fringes might find themselves facing greater disappointments and challenges.
