Author: Paul Krugman

Original title: The Trump Trade is Unraveling

introduction

Paul Krugman, the 2008 Nobel laureate in economics and a columnist for The New York Times, is known for his strong Keynesian stance and incisive public policy analysis. He excels at translating complex economic mechanisms into clear social insights and never shies away from controversial political pronouncements.

In his latest article dated November 24, 2025, Paul Krugman raises a pointed point:

Bitcoin has evolved into a "Trump deal," its fate deeply intertwined with Trump's political influence. Therefore, he sees the recent Bitcoin crash not as an isolated market phenomenon, but as a direct reflection of Trump's declining political power and waning influence in the financial markets.

The following is the main text:

What is the purpose of Bitcoin? It is not a currency—that is, it is not a medium of exchange that can be used for payments.

It cannot hedge against inflation.

It also cannot hedge against financial risks—on the contrary, Bitcoin prices typically move in the same direction as AI-related stocks that have recently driven the stock market, and the volatility is even greater.

If Bitcoin has any use cases, its core function lies in concealing the flow of funds: encryption facilitates anonymous transactions without leaving a paper trail. Not all of these transactions are illegal, but many are.

It's worth noting that anonymity not only fuels criminal activity among crypto users but also makes them easier targets. Once you possess the Bitcoin key—the code to unlock it—it belongs to you, regardless of who you are or how you obtained it. In this sense, acquiring a Bitcoin key is akin to acquiring a bag full of hundred-dollar bills.

This feature has triggered a wave of kidnappings targeting large cryptocurrency investors, with criminals demanding that victims hand over their crypto keys.

In fact, such kidnappings have become so common that a recent major Bitcoin conference dedicated a full-day "anti-kidnapping" workshop, where participants learned skills such as how to bite through straps with their teeth.

Besides fueling crime, Bitcoin is increasingly becoming a tool for financial plunder. Cryptocurrencies—and worse, the stocks of companies that borrow money to buy them—are being heavily marketed to naive investors who are unaware of the risks. They may profit when Bitcoin rises, but most likely have no idea how much they will lose when it crashes.

Cryptocurrencies have indeed seen a significant drop recently. While Bitcoin has outperformed less popular smaller coins, it has still fallen by approximately 25% since late October.

Bitcoin may rebound because it is not just an asset, but also a kind of belief.

When I spoke with Hassan Minhaj (a well-known American host and political commentator) about Bitcoin, he immediately responded to my criticism by saying, "I don't want to be turned into a meme. Bitcoin believers are already targeting me."

This unwavering belief allows Bitcoin to consistently recover from setbacks and scandals that could devastate ordinary investments, as loyal followers simply double down when prices fall. This time may be no different.

But it could also be different—because Bitcoin has essentially become a "Trump deal." Bitcoin prices soared after Trump's election victory last year, while the recent crash coincides with a series of political setbacks Trump has faced.

Why is it called a Trump deal?

Part of the reason is that Trump is giving back to the crypto industry through pro-crypto policies after his family essentially received huge bribes from it.

It is worth noting that he has signed an executive order allowing ordinary Americans to invest their 401(k) retirement funds in crypto assets—investors who are often unaware of the risks involved.

More broadly, as I have stated, cryptography is increasingly becoming a tool for financial plunder, and the Trump administration has been extremely lenient towards such plundering. They are working to dismantle institutions established after the 2008 financial crisis to protect investors and markets, such as the Consumer Financial Protection Bureau.

Treasury Secretary Scott Bessant and other Trump administration officials and allies (including some Federal Reserve officials) are also making great efforts to weaken bank regulations—regulations that were originally established to limit high-risk behaviors that triggered the 2008 crisis.

All of this is detrimental to retail investors and financial stability, but beneficial to financial speculators such as Bitcoin promoters.

So how should we interpret the recent plunge in Bitcoin? We can view it as the collapse of the "Trump trade." While Trump continues to lavishly reward the industries that enriched his family, and his inner circle continues to create fertile ground for various forms of exploitation, Trump's power is clearly waning. Therefore, the price of Bitcoin, which has essentially become a bet on Trumpism, has plummeted in response.

Why has Trump suddenly shown signs of decline? Polls have consistently given him extremely low ratings since the spring, but his net approval rating has dropped significantly in the past month.

Despite his recent claim of having the "highest approval rating of his political career"—no one knows which poll he cited—the Democratic victories in Virginia and New Jersey on November 4 have completely dispelled any doubts about his extremely unpopular poll results.

These election losses have shaken the willingness of congressional Republicans to follow Trump's lead. Meanwhile, the escalating relationship between Trump and Jeffrey Epstein is eroding MAGA's base.

Many political analysts may not have fully grasped the profound impact on the many supporters who were convinced that Trump was protecting the world from Democratic pedophiles, and the shock they experienced when they gradually realized that they might have confused hero with villain.

Is linking Trump's political predicament to cryptocurrency prices far-fetched? Not at all. As Josh Marshall often emphasizes—power has a unifying effect. A weakened Trump will have less impact on all fronts, including efforts to promote the development of the crypto industry.

I will explore the connection between politics and the crypto world in more detail in a subsequent article. For now, I just want to reiterate:

Bitcoin has become a Trump deal, and its price drop is an indicator of Trump's waning control over the Republican Party.