• Bitcoin and the crypto market could face a significant decline coinciding with Donald Trump’s inauguration day, noted Arthur Hayes.
• He suggested that Donald Trump only has one year to enact policies that favor the crypto industry.
• Although Hayes highlighted that a Bitcoin Strategic Reserve could boost crypto prices, he doesn’t believe it’s feasible.

Bitcoin (BTC) and the crypto market could face a massive sell-off as expectations for Donald Trump’s administration of pro-crypto policies could be short-lived, according to Arthur Hayes.

Arthur Hayes speculates on possible crypto dump following Donald Trump’s inauguration

In a blog post on Wednesday, Arthur Hayes, co-founder of BitMEX and CIO of Maelstrom, shared concerns about the impact of Trump’s inauguration on the crypto market, suggesting that investors could encounter heavy losses in 2025.

Hayes argued that the divide between the crypto industry’s over-optimistic expectations and the challenges of implementing meaningful policy changes would likely lead to a significant market downturn.

He also noted that there are no politically acceptable solutions for Trump to swiftly enact the sweeping policy changes many crypto investors anticipate. 

“I don’t believe the markets realize how little time Trump actually has to accomplish anything. The market believes that Trump and his people can immediately achieve economic and political miracles,” Hayes noted.

With Trump only having 2025 to introduce new policies, the limited timeline adds further pressure, heightening the risk of market disappointment.

“I believe the crypto markets will experience a harrowing dump around Trump’s January 20, 2025 inauguration day,” he added.

He highlighted that the time factor stems from the fact that most elected officials begin campaigning by late 2025 for the midterm elections in November 2026, including the House of Representatives. Hence, Hayes believes Trump has only one year to implement meaningful policy changes.

The crypto market has been in an uptrend since Donald Trump won the US presidential in November, with Bitcoin consistently reaching new highs.

Meanwhile, Hayes noted that Trump’s promise of a Bitcoin Strategic Reserve could be a political maneuver aimed at strengthening the supremacy of the US dollar over other countries through a surge in Bitcoin’s fiat price. He anticipated a scenario where the government would devalue the dollar against gold by printing new money to fuel their Bitcoin purchase.

This will invite competition from other sovereign nations trying to outmatch the US in holdings, further boosting Bitcoin’s price. 

“The price of Bitcoin then would rise asymptotically, because why would anyone sell Bitcoin and receive fiat, which the government is actively devaluing,” Hayes said.

On the flip side, he stated that Donald Trump may not keep to his promise of providing a strategic Bitcoin reserve because politicians are more likely to use newly created dollars to fund programs or benefits that appeal to voters, especially with another election approaching.

While Hayes doesn’t believe the US government will buy Bitcoin, he notes that even the possibility of a strategic reserve for the asset is enough to drive demand and push prices higher.

He added that he would get back on track quickly if his prediction of a market dump in January backfired. “Knowing this, we are committed to admitting defeat if the bull market steamrolls through January 20, licking our wounds, and getting back on the bull,” wrote Hayes.

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Chrystia Freeland, Canada’s deputy prime minister and finance minister, delivered a stunning blow to Prime Minister Justin Trudeau on Monday, resigning from cabinet just hours before she was scheduled to present the government’s fall economic statement. The abrupt departure is the most significant public fracture within Trudeau’s government to date and has thrown his leadership into uncertainty.

Sources within the Liberal Party told CTV News that Trudeau is now weighing his options as leader, with some members privately expressing concerns about his ability to hold the party together heading into the next election.

Freeland, who played a central role in steering Canada through trade disputes during the Trump administration and managing the country’s pandemic response, announced her resignation in a sharply worded letter published early Monday. Her decision immediately ignited chaos on Parliament Hill, sparking questions about Trudeau’s leadership and the government’s stability.

In a message shared on social media Monday, she revealed that her decision to shift roles followed an offer from Prime Minister Trudeau for a different Cabinet position. “On Friday, you told me you no longer want me to serve as your Finance Minister and offered me another position in the Cabinet,” Freeland wrote. “Upon reflection, I have concluded that the only honest and viable path is for me to resign from the Cabinet.”

Freeland also criticized Trudeau’s advocacy for higher spending as a mere political tactic, expressing her concerns that it could undermine Ottawa’s capacity to address the impending 25% import tariffs promised by U.S. President-elect Donald Trump.

See my letter to the Prime Minister below // Veuillez trouver ma lettre au Premier ministre ci-dessous pic.twitter.com/NMMMcXUh7A

— Chrystia Freeland (@cafreeland) December 16, 2024

“To be effective, a Minister must speak on behalf of the Prime Minister and with his full confidence. In making your decision, you made clear that I no longer credibly enjoy that confidence and possess the authority that comes with it. For the past number of weeks, you and I have found ourselves at odds about the best path forward for Canada. Our country today faces a grave challenge. The incoming administration in the United States is pursuing a policy of aggressive economic nationalism, including a threat of 25 per cent tariffs.”

“We need to take that threat extremely seriously,” Freeland continued. “That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”

Trump announced plans to impose a 25% tariff on all imports from Canada and Mexico and a 10% tariff on Chinese goods, effective January 20 next year.

The fallout was swift. Conservative Party leaders wasted no time demanding a snap election. NDP Leader Jagmeet Singh highlighted the economic strain on Canadians, stating, “People can’t afford their groceries.” His remarks were quickly met with loud jeers from Conservative MPs, leading to intervention by the Speaker.

Once order was restored, Singh reiterated his concern, “Canadians literally cannot afford the groceries they need.” He then criticized the prime minister’s handling of economic threats from abroad, asserting, “Trump is threatening hundreds of thousands of jobs in this country … The prime minister cannot remain in that position. Will he resign?”

“We are calling for Justin Trudeau’s resignation,” said Singh.

Trudeau’s political career began in 2008 when he was elected as the Member of Parliament for Papineau. He became the leader of the Liberal Party in 2013 and led the party to a majority government in the 2015 federal election. In recent years, however, Trudeau’s administration has faced challenges, including allegations of foreign interference in Canadian elections.

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Jamie Dimon, head of America’s largest bank, JPMorgan Chase — and commonly referred to as the ‘president of Wall Street’ — spent much of this past year warning that there’s an elevated risk that the US experiences 1970s-esque stagflation, which is when economic growth stagnates while inflation heats up.

“I look at the amount of fiscal and monetary stimulus that has taken place over the last five years — it has been so extraordinary; how can you tell me it won’t lead to stagflation?” Dimon said at a conference in May.

His prediction, however, has been pooh-poohed by many leading economic voices; chief among them was Federal Reserve Chair Jerome Powell, who said at a press conference in May, “I don’t see the stag or the ‘flation.”

That, of course, was before President-elect Donald Trump won the election. Now, Americans may have to actually brace for stagflation — something the nation’s economy hasn’t experienced in over half a century. This time around, though, fueled by tariffs.

Just over a month from now, Trump will have the power to levy tariffs on other nations at the flick of a pen. And once inaugurated on January 20, he has pledged to immediately impose a 25% tariff on Mexican and Canadian imports and increase tariffs on Chinese goods by an additional 10%.

On the campaign trail, he also promised to levy a 10% to 20% tax on all imports and increase tariffs on Chinese goods by at least 60%.

There are some doubts as to whether Trump will follow through with these plans and, instead, use them as a means to negotiate with other nations. However, if these significant, broad-based tariffs go into effect, it could send the US economy back to one of the most painful periods that took over a decade to resolve.

“I was around for stagflation. It was 10% unemployment. It was high single-digits inflation and very slow growth,” Powell said back in May, referring to when oil prices spiked during the Arab oil embargo in the 1970s.

When the Fed responded to high levels of unemployment in the 1970s by cutting rates to relieve pressure businesses faced, it later had to contend with higher inflation. To tackle higher inflation, central bankers raised interest rates. But that ushered in more unemployment.

To break that vicious cycle, the Fed opted to prioritize getting inflation down by aggressively raising interest rates, even if it meant the economy would enter a recession, which it did.

The US economy currently isn’t anywhere near the conditions the Fed faced during much of the 1970s and 1980s. Though it’s risen over the course of this year, at 4.2%, the nation’s unemployment rate is two percentage points lower than the average seen over the last 50 years.

Meanwhile, inflation has cooled significantly over the past two years. It’s now just a touch above the Fed’s 2% target. Getting it down to that exact level has proved to be challenging.

Overall, the economy grew at an annualized rate of 2.8% last quarter, a slightly weaker pace than the prior quarter, but nevertheless impressive considering the Fed raised interest rates to the highest level in over two decades to fight inflation, which peaked at a 40-year high two years ago. (The Fed started lowering rates earlier this year and is expected to continue to cut at its meeting this week. However, it can take years for the effect to be felt across the economy.)

The tariffs Trump has floated aren’t inherently inflationary, Michael Feroli, chief US economist at JPMorgan, told CNN.

While they certainly have the power to make many, if not the majority, of goods Americans buy more expensive, that could just be essentially a one-time bump in the prices of goods, similar to a sales tax increase, he said. But higher tariffs can quickly fuel cascades of price increases if Americans expect higher inflation because of them and demand higher wages, which, in turn, could result in businesses continuing to raise prices.

And if new tariffs are imposed in a “haphazard” and “hasty” way such that businesses don’t have ample time to reconfigure their supply chains, it could significantly hamper economic growth by also forcing businesses to pull back on any new investments due to heightened uncertainty, Feroli said.

Stagflation could also materialize if other nations were to respond with retaliatory tariffs on US-produced goods, likely leading employers to lay off workers as a result, he said.

Though Feroli believes the risk that the US economy experiences stagflation is higher now compared to earlier in the year, it’s not the base case he and the team of economists he works with are predicting at the moment. That’s because they aren’t forecasting inflation jumping by more than a few tenths of a percentage point from current levels, partly because he believes the Trump administration will give US businesses sufficient time to respond to higher tariffs if they’re set in motion.

Wells Fargo economists share a similar view to Feroli.

“These tariff increases, if implemented shortly after Inauguration Day, would impart a modest stagflationary shock to the U.S. economy, boosting our inflation forecasts in the near term, but also dampening our economic growth outlook,” they said in a note last month, published shortly after Election Day. “Should this occur, the probability of a stagflation scenario in our growth model would likely increase.”

“That said, there is tremendous uncertainty about future potential policies,” they cautioned.

A significant majority of Americans appear to back one of President-elect Donald Trump’s cornerstone policy proposals, signaling more public support as he prepares to return to the White House. According to the latest CNBC All-America Economic Survey, a sweeping consensus has emerged around Trump’s campaign promises, suggesting the political winds may be shifting in his favor.

The survey reveals that 54% of the public are “comfortable and prepared to support” Trump as president. According to the findings, 60% believe that deploying the military to the border to halt illegal drugs and human trafficking should be an immediate priority for the new administration in 2025. An additional 13% agree it should be addressed, but later in the term. Only 24% are completely against the proposal, including 51% of Democrats, 12% of independents, and 3% of Republicans.

The survey found that Trump’s economic agenda—focused on deregulation, tax cuts, and restoring American manufacturing—resonates with the public. Jay Campbell, a partner at Hart Research and the Democratic pollster for the survey, noted a shift in public sentiment from 2016. “In 2016, there were a few more people who said, ‘I’m not sure,’ and took a kind of a wait-and-see approach,” he said. “Those numbers have dropped by half or more … People know what to expect with Donald Trump now.”

The survey revealed support for several policies, including reducing individual taxes, increasing deportations of undocumented immigrants, downsizing government operations, expanding oil drilling on federal lands, and easing taxes and regulations for businesses. The idea of raising tariffs received tepid support, with only 27% in favor of immediate action and 24% suggesting it could be addressed later in the term, against 42% opposition.

Americans are more optimistic about the economic prospects under Trump’s second presidency than they were during his first term. A notable 51% of respondents expect their personal financial situation to improve, a 10-point increase from 2016. 51% anticipate the U.S. economy will also get better, rising 5 points from the previous election.

As President Joe Biden exits office, public sentiment towards the economy remains largely negative. Only 25% of Americans rate the economy as excellent or good, while a significant 73% view it as fair or poor. Biden’s final economic approval stands at 36%, with 58% disapproving. His net approval rating has slightly improved from the lowest point in 2022 but remains negative at -22, a sharp decline from the +5 net positive at the start of his presidency.

Looking ahead, there’s a surge in economic optimism, primarily fueled by Republican enthusiasm following the election. Forty-six percent of Americans now believe the economy will improve over the next year, up nine points since October. This shift is largely driven by Republicans and, to some extent, independents moving from pessimism to optimism. Conversely, 33% think the economy will deteriorate, a rise of 16 points, reflecting increasingly pessimistic views among Democrats.

Forty percent of respondents believe now is a good time to invest in stocks, marking the most positive sentiment since 2019. This is a significant shift from Biden’s administration when opinions on stocks ranged from neutral to deeply negative. The change is largely attributed to Republicans, who, following the election, have become 56 points more positive about investing in stocks compared to their views in August.

Meanwhile, the survey highlights that while cryptocurrencies are generating buzz on Wall Street, they haven’t quite captured the same enthusiasm on Main Street. Currently, only 13% of Americans report owning cryptocurrency, and 15% view it as the best investment choice, a slight increase of 4 points from the last time this question was posed in 2022. However, crypto still lags behind more traditional investments like real estate, stocks, gold, and savings accounts in terms of popularity.

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Yes, it’s called Fartcoin. Yes, it is totally useless.

And yes, it has nevertheless tripled in value over the past week to a market capitalization of more than $700 million — about equal to those of Office Depot, Guess jeanswear, and the parent company of Steak N’ Shake.       

The carnival-casino era of cryptocurrencies has come back with a vengeance, riding a broader wave of investment in bitcoin that was itself spurred by the election of Donald Trump. It’s minting millionaires while potentially harming others — yet everyone, even the losers, seem to be in on the joke.

The wave of “memecoiners” is a mix of longtime bitcoin holders and people simply desperate to change their fortunes in an era of sky-priced homes and equities, according to Toe Bautista, research analyst for GSR, a decentralized finance group. While many memecoin traders, flush from gains thanks to bitcoin’s 130% increase this year — 50% of which has come since Trump’s election last month — are simply “moving down the risk curve” into areas of pure speculation, Bautista said. Others see the potential of making 10 times their money overnight.

“A lot of it is people thinking, ‘I can get some sort of edge by having a better chance at a lottery ticket,” Bautista said.  

Memecoin buyers and sellers alike are, for the most part, aware that their trading activity amounts to the riskiest kind of gambling, Bautista said. It’s all about exiting one’s position to avoid getting left with “holding the bag” and failing to trade up and strike while the price is hot.

“Because they’re worthless, you’re betting on the ‘greater fool,’” he said, referring to the idea that someone else will pay a higher price for a given memecoin. “You’re thinking, ‘I’m early to this, someone will buy the bags.’ But there’s no underlying driver of its value.”

For the most part, the greatest risk in trading memecoins, which tend to be based on the lifespan of viral internet memes, is the meme itself fading away from the cultural zeitgeist. And indeed, the gains from a given news cycle for a very select few can be substantial. Blockchain data shows at least one holder of a coin created in the wake of the Peanut the Squirrel incident last month, which involved the death of a rodent possibly being kept without permission by a New York man, is sitting on nearly half a billion dollars.   

Today, that coin, PNUT, is down about half from its peak value of $2.47 as that news story has faded from view. 

Yet there are also operational risks to memecoins, as illustrated by the rise and rapid fall of “Hawk” coin, released earlier this month by Haliey Welch, a Tennessee woman who has parlayed a viral lewd street interview into a successful podcast. 

Over the course of 24 hours, Hawk’s market cap peaked at $500 million before collapsing to $28 million, prompting complaints about dramatic losses in funds. Those complaints have not been independently verified by NBC News. 

Facing accusations of insider trading, Welch released a statement saying neither she nor anyone on her team had sold the coins, blaming instead “sniper” algorithmic bots designed to sell as prices begin to surge.

Bautista said that indeed, algorithmic trading, which has long been part of mainstream trading on Wall Street, is now routinely deployed in the memecoin space. He estimates that of the top-20 traded coins in crypto, half are memecoins whose trades are almost entirely driven by bots designed to spot and respond to price movements.

Is it legal? Some believe memecoins are permitted because the Securities and Exchange Commission has never formally categorized bitcoin as a security. Yet the agency has taken actions against exchanges that have permitted trading of other tokens. And, crucially, many memecoins, including Fartcoin, do not appear able to be legally purchased from U.S. soil on most of the crypto exchanges offering them.

Ground zero for launching memecoins is a website called Pump.fun, which allows users to “launch a coin that is instantly tradeable in one click for free.” Launched in January 2024, the site has generated over $288.4 million in revenue since its inception, according to analytics data cited by CoinTelegraph, a crypto industry publication. 

Earlier this month, the United Kingdom’s Financial Conduct Authority said the website was not authorized in the country and warned anyone who interacted with a product or service associated with the site had no investor protections.

Despite this, the site’s terms and conditions state that its provisions are governed by “the laws of England.”

A spokesperson for the website was not immediately available for comment.   

It may be the digital Wild West, but some tools have been developed to help nonsavvy memecoin participants avoid outright scams. A site called Rugcheck.xyz bills itself as capable of scanning memecoin ownership data to determine whether an actor or small group of actors are capable of putting their thumb on the scale of the market. Pump.fun itself says it prevents “rugs,” or sudden price dumps, by making sure that any tokens it launches have no presales or small-batch allocations that would benefit insiders. 

It is not clear how much longer the current crypto “bull” cycle will last, but at least one analyst believes it is still in relatively early innings given likely developments next year — namely, potentially further reductions in interest rates by the Federal Reserve, and the implementation of more crypto-friendly policies by the Trump administration.

“There are lots of events in 2025 that can help drive bitcoin and crypto prices up further,” said Gracy Chen, CEO of crypto group Bitget, in an interview with NBC News. 

In fact, Trump world has already shown signs of accelerating its embrace of cryptocurrencies. Bloomberg News reported on Friday that World Liberty Financial, a crypto project “inspired by Trump,” has been buying millions of dollars worth of tokens beyond bitcoin, a sign that the decentralized finance lending platform could launch soon. Trump has been named as an eventual “financial beneficiary” of World Liberty.  

A spokesperson for World Liberty did not respond to a request for comment.

Yet there is clearly a dark side to the memecoin world. Omid Malekan, who teaches crypto at the Columbia Business School at Columbia University, said it is emblematic of the economic “nihilism” that has taken root among many young Americans who feel they have been priced out of the American Dream. 

“All these kids are like, ‘All the good stocks are way too expensive. And houses? I can’t afford them,’” Malekan said. “So, ‘I’ll gamble on something that can ‘10x’ my money, and if I lose it all, Who cares, I was screwed anyway.’”