After spending over $245 million in the 2024 election cycle, the cryptocurrency industry is now reaping its rewards. The industry—consisting of a variety of cryptocurrency exchanges, venture capital firms, and wealthy investors—helped push out key anti-crypto hardliners in Congress, including Representative Katie Porter of California and Senator Sherrod Brown of Ohio. Most crucially, the crypto industry’s influence now extends all the way to the Oval Office. At a cryptocurrency conference in the United Arab Emirates in December, Eric Trump promised that his father would be “the most pro-crypto president in the history of America,” and Trump himself has vowed that “the rules will be written by people who love [the crypto] industry.”
In the face of a favorable regulatory environment, crypto markets have seen soaring, with the price of Bitcoin surpassing $100,000 a month after Trump’s victory. However, despite the hype, cryptocurrencies remain a bubble of rampant speculation. By promoting the crypto industry, the Trump Administration recklessly legitimizes a high-risk investment, jeopardizing the wellbeing of the Americans most impacted by highly volatile investments such as crypto—traditionally marginalized groups who lack generational wealth.
Cryptocurrencies create a system of transactions which do not rely on a trusted third party such as a bank. This decentralized process allows consumers to engage with each other directly, in theory reducing the cost of any given transaction. Crypto optimists have long lauded crypto’s potential role in fostering financial inclusion, such as providing financial services to the unbanked (those who do not have their own bank account), facilitating the affordable transfer of remittances, and as a way to preserve wealth in countries with volatile currencies. However, these promises have largely failed to pan out due to crypto’s slow transaction speed, impracticality for everyday use, and susceptibility to hacking.
As such, Bitcoin and other cryptocurrencies have largely become a speculative investment that has found a unique appeal in low-income and minority investors. Due to their decentralized nature, relative ease of access compared to other types of investments, and a wariness within minority communities towards traditional financial institutions, cryptocurrencies have garnered a reputation as a wealth-building tool that circumvents the often exclusionary and inequitable legacy financial system. In turn, many crypto firms have chosen to double down on this appeal, for instance, through ads specifically targeting Black investors featuring celebrities such as LeBron James and Spike Lee and the placement of Bitcoin ATMs throughout minority and low-income neighborhoods in US cities.
As a result, those within low-income and minority communities are more inclined to own crypto. For instance, underbanked households, which possess a bank account but frequently rely on alternative financial services such as payday loans and tend to be of lower income, are more likely to hold cryptocurrencies. Additionally, Black, Hispanic, and LGBTQ Americans hold cryptocurrencies at a higher rate than their White and heterosexual counterparts. In addition, compared to White investors, Black investors are almost twice as likely to view crypto as a safe investment.
However, this image of crypto spells danger, particularly for retail investors. Because of crypto’s volatility, many individual investors—especially Black and Hispanic investors, who generally lack emergency savings compared to their White counterparts—cannot absorb the losses which may occur from week to week or day to day. According to a study by the Bank of International Settlements, between 2015 and 2022, about three-fourths of Bitcoin holders lost money on their investments. In addition, many individual (including low-income and minority) investors may lack the time or knowledge to keep up with the market’s developments. In 2022, as crypto exchange FTX and cryptocurrency Terra collapsed, eliminating billions in value, retail investors generally bought more crypto as larger investors dumped their holdings, effectively placing the brunt of the losses on smaller investors, some of whom lost a significant portion of their life savings. Lastly, Bitcoin ATMs, many of which directly target minority investors, often charge substantially greater fees than traditional ATMs, which is reminiscent of other predatory financial products such as payday loans.
This trend of volatility is likely to continue for the foreseeable future as the Trump Administration has only exacerbated crypto speculation. Even as the administration has vowed to establish a new regulatory framework to govern crypto, its actions indicate that any regulations that are established will probably fail to make crypto a safe investment for individual investors. Trump has appointed Paul Atkins and David Sacks, both staunch crypto supporters, in key regulatory positions as the head of the Securities and Exchange Commission (SEC) and crypto czar, respectively. The SEC has reassigned its top crypto litigator, Jorge Tenreiro, who was leading several lawsuits against crypto exchanges over potential violations of investor-protection laws, and is now expected to ultimately settle or dismiss these cases, likely on terms favorable to the crypto exchanges being sued. The Republican-led Congress could also pass legislation delegating crypto regulation to the Commodity Futures Trading Commission (CFTC), whose smaller budget (compared to the SEC) limits its regulatory capacity, potentially further weakening investor protections.
Ultimately, it is Trump’s embrace of the meme coin (a type of cryptocurrency based around a popular meme or figure and which has no inherent purpose) that most clearly embodies his attitude and policy inclinations towards crypto. Three days before his inauguration, Trump released his $TRUMP meme coin, with Melania Trump announcing her meme coin $MELANIA soon after. Despite being marketed as a way to support Trump and not an investment opportunity, the Trump Organization has already earned close to $100 million in traders fees, while some 800,000 wallets, many belonging to small investors, have lost nearly $2 billion dollars. Glaring conflict of interest aside, Trump’s meme coin indicates a tacit endorsement of the shady business practices which enrich the rich and harm the retail and minority investor, along with an unwillingness to to address crypto’s biggest problem—the abundance of sketchy financial products and risk that overshadows any true innovation crypto and the technology behind it could bring. While some in the industry may privately bemoan this approach as a “horrible look” for the industry as a whole, Trump will be laughing all the way to the bank.