Trump's trade has collapsed! Nobel Prize winner: Bitcoin has fallen 25% as a political gamble warning.

The 2008 Nobel laureate in Economics, Paul Krugman, pointed out that Bitcoin has evolved into a “Trump trade,” with its fate deeply tied to Trump's political influence. He stated that Bitcoin has fallen by about 25% since late October, which is a direct reflection of the decline of Trump's political power in the financial markets.

Nobel Laureate Krugman: Bitcoin is a tool for crime

Paul Krugman, the 2008 Nobel Prize winner in Economics and columnist for The New York Times, is known for his distinct Keynesian stance and sharp public policy analysis. He excels at transforming complex economic mechanisms into clear social insights and never shies away from controversial political judgments. In his latest article dated November 24, 2025, Krugman is extremely critical of Bitcoin.

What is the actual use 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, the price of Bitcoin usually fluctuates in the same direction as the recent AI concept stocks that drive the stock market, and its volatility is even more pronounced. Krugman's criticisms are not new; he has long questioned the intrinsic value of Bitcoin.

If we talk about the use case of Bitcoin, its core function lies in concealing the flow of funds: encryption technology facilitates anonymous transactions that leave no paper trail. These transactions are not necessarily all illegal, but many of them indeed are. Krugman's characterization of Bitcoin as a “tool for crime” is highly controversial, but he provides real-world cases to support it.

It is worth mentioning that anonymity not only facilitates criminal activities among cryptocurrency users but also makes them more susceptible to becoming targets of crime. As long as you possess the Bitcoin keys—unlocking the code to it, regardless of who you are or how you obtained it, it belongs to you. In this sense, obtaining a Bitcoin key is like acquiring a bag full of hundred-dollar bills. This characteristic has triggered a wave of kidnappings targeting large cryptocurrency investors, with criminals demanding victims to hand over their keys.

In fact, such kidnappings have become so common that the most recent major Bitcoin conference set aside an entire day for a “anti-kidnapping” workshop, where participants learned skills such as how to bite through bindings with their teeth. This darkly humorous reality reveals the personal safety risks that come with crypto wealth.

In addition to facilitating crime, Bitcoin is increasingly becoming a tool for financial predation. Cryptocurrencies—worse yet, the stocks of companies that purchase cryptocurrencies with borrowed funds—are heavily marketed to naive investors who are not yet aware of the risks. They can still profit when Bitcoin rises, but most may not even understand how much they will lose when it crashes.

Krugman's Four Major Criticisms of Bitcoin

Non-Monetary: Not a medium of exchange used for everyday payments.

Non-inflation hedge: cannot protect purchasing power from erosion by inflation

Non-risk hedge: Fluctuates in the same direction as tech stocks with even greater volatility.

Promoting Crime: Anonymity facilitates illegal transactions and kidnapping for ransom.

Bitcoin falls 25% in sync with Trump's political setbacks

Recently, cryptocurrencies have indeed experienced a significant fall. Bitcoin has performed better than the lesser-known small coins, but since late October, it has still fallen by about 25%. Krugman attributes this crash to the collapse of the “Trump trade.” Bitcoin may rebound, as it is not only an asset but also a kind of faith. This characteristic of faith allows Bitcoin to always recover from setbacks and scandals that would destroy ordinary investments, as loyal followers tend to double down in the face of price declines.

But Krugman believes this time may be different—because today's Bitcoin has essentially become a “Trump trade.” After Trump's victory last year, Bitcoin prices soared, while the recent plunge coincides with a series of political setbacks Trump has faced. Why is it called a Trump trade? Part of the reason is that after his family effectively received huge bribes from the crypto industry, Trump is giving back to that industry through pro-crypto policies.

It is worth noting that Trump has signed an executive order allowing ordinary Americans to invest their 401(k) retirement funds in cryptocurrencies—while these investors often do not fully understand the risks involved. This policy exposes trillions of dollars in retirement savings to highly volatile assets, and if the crypto market crashes, the retirement security of millions of Americans will be threatened. Krugman considers this to be an extremely irresponsible policy.

More broadly, as Krugman stated, cryptocurrency technology is increasingly becoming a tool for financial predation, and the Trump administration is extremely tolerant of such predatory behavior. They are making efforts to dismantle the institutions established after the 2008 financial crisis to protect investors and market safety, such as the Consumer Financial Protection Bureau. Treasury Secretary Scott Pruitt and other Trump administration officials and allies (including some Federal Reserve officials) are also relentlessly undermining bank regulations—regulations that were originally set up to limit the high-risk behaviors that triggered the 2008 crisis.

All of this is detrimental to retail investors and financial stability, but beneficial to financial speculators like Bitcoin promoters. Krugman's argument reveals the relationship between deregulation and Bitcoin's prosperity: when regulators no longer protect investors, predatory financial products can thrive.

Trump's poll plummet and election defeat

Krugman pointed out, why has Trump suddenly shown a decline? Since spring, polls have consistently given him extremely low ratings, but in the past month his net approval rating has dropped significantly. Although Trump just claimed to have the “highest approval rating in his political career”—no one knows which poll he is referencing—his party's big victories in Virginia and New Jersey on November 4 have completely dispelled doubts about his extremely unpopular poll results.

These electoral defeats have shaken the willingness of congressional Republicans to follow Trump closely. Meanwhile, the ongoing fallout from Trump's relationship with Jeffrey Epstein is undermining the MAGA base. Many political analysts may not fully recognize that a significant number of supporters once firmly believed that Trump was safeguarding the world from the Democratic Party's pedophilia, and the impact on them when they gradually realize they may have confused heroes with villains is profound.

Is it too far-fetched to associate Trump's political predicament with cryptocurrency prices? Krugman does not think so. As political commentator Josh Marshall often emphasizes—power has unity. The weakened Trump will see the effectiveness of his efforts across all fronts diminish, including efforts to promote the development of the cryptocurrency industry. This theory of “power unity” has empirical support in political science: when leaders lose popular support, their ability to push policies, the loyalty of allies, and execution efficiency all decline comprehensively.

From the perspective of market psychology, a considerable proportion of Bitcoin investors are Trump supporters. These individuals believe that Trump's pro-crypto policies will drive the long-term rise of Bitcoin prices, leading to a massive buy-in after Trump's victory. When Trump's political position wavers, this foundation of confidence also collapses, resulting in sell-offs and price declines. The linkage between this political sentiment and market prices is the core of the “Trump trade” concept.

Massive Bribery of Trump by the Cryptocurrency Industry

Krugman specifically pointed out that the Trump family “effectively received huge bribes from the cryptocurrency industry.” According to previous reports, the Trump family profited over 1 billion dollars in the past year through projects such as World Liberty Financial, TRUMP memecoin, and American Bitcoin. These income sources include: token sales, transaction fee sharing, equity appreciation, promotional expenses, etc.

Krugman's logic is: The Trump family gains huge profits from the crypto industry → The Trump administration introduces pro-crypto policies as a reward → These policies drive up Bitcoin prices → Investors view this as the “Trump trade” and buy in large numbers. This chain of benefits deeply binds Bitcoin's price to Trump's political fate. Once Trump's power wanes and he can no longer promote pro-crypto policies, the policy support for Bitcoin will disappear, and the price will naturally fall.

From an ethical perspective, Krugman questions the legitimacy of such a quid pro quo. Does it constitute corruption when the president and their family earn massive income from a certain industry and then promote policies that benefit that industry? In traditional political ethics, this behavior is referred to as “conflict of interest” or “policy for profit,” and is illegal in many countries. However, in the current political environment in the United States, this behavior, although controversial, is not effectively restrained.

Krugman particularly criticized the executive order signed by Trump that allows 401(k) retirement funds to be invested in cryptocurrency assets. 401(k) is the largest retirement system in the United States, covering tens of millions of workers, with assets totaling trillions of dollars. These retirement funds were originally subject to strict investment restrictions, only being able to allocate to relatively safe stocks, bonds, and money market funds. Allowing them to be invested in cryptocurrency assets means exposing retirement security to extremely high risks. If the crypto market crashes, millions of Americans could lose their retirement savings.

Krugman believes that this policy is not to protect investors, but to inject large amounts of capital into the crypto industry, driving up coin prices and increasing the value of the Trump family's crypto assets. This is a typical case of “benefit transfer”: using public policy to serve private interests.

Market Mapping of Power Decline

Krugman summarizes: Bitcoin has become a Trump trade, and its price fall is an indicator of Trump's waning control over the Republican Party. This conclusion downgrades Bitcoin from 'digital gold' to 'political bet', from a decentralized revolutionary asset to a speculative tool serving specific political interests.

From the perspective of market reality, Krugman's observations do have some truth to them. Bitcoin soared from $70,000 to $126,000 after Trump's victory, an increase of 80%; following Trump's declining polls and political setbacks, it fell from $126,000 to $81,000, a decrease of 36%. This high correlation with Trump's political fate supports the narrative of the “Trump trade.”

However, the Bitcoin community strongly opposes this narrative. They believe that the value of Bitcoin stems from its technological characteristics, scarcity, and decentralization, unrelated to any political figures. Trump's support is merely a short-term catalyst that does not alter the long-term value logic of Bitcoin. When Krugman mentioned Bitcoin during a conversation with American host Hasan Minhaj, Minhaj immediately responded, “I don't want to be turned into a meme, the Bitcoin believers already have their eyes on me.” This reaction shows the sensitivity and defensiveness of the Bitcoin community towards criticism.

Krugman's warning is extremely important for ordinary investors. If Bitcoin has truly become a “Trump trade,” its price will be highly dependent on Trump's political fate. Against the backdrop of Trump's declining polls, the potential loss in the 2026 midterm elections, and even possible legal lawsuits, Bitcoin's price may face greater downside risks. Investors need to reassess: are you investing in the technological value of Bitcoin or in Trump's political prospects?