Trump’s Crypto Grift Is Imploding

Long-term interest rates are increasing, which generally negatively impacts speculative assets like cryptocurrencies. When money is cheap and borrowing is easy, asset bubbles tend to inflate. Higher rates make these unproven assets less appealing as investors seek more stable returns.

Katherine Rampell states, 'long-term interest rates are up... and that's bad generally for speculative assets of all kinds. You want money to be really cheap... if you want to have these inflated asset bubbles.'

Despite initial claims, crypto has not performed as a hedge against inflation or a flight-to-safety asset during economic uncertainty. Gold prices have risen significantly, demonstrating its traditional role, while crypto prices have fallen, indicating a divergence in investor perception of their respective utilities.

Rampell notes, 'it hasn't really been a great hedge against inflation... you've seen gold prices go way up... but crypto has not held up.' She also mentions, 'it looked like that might be the flight to safety, but then it was tested when we invaded Venezuela and... you did not flight to safety in the form of crypto.'

The widespread sell-off in speculative assets, including crypto, might be an indicator of broader economic concerns, such as an impending recession. When people feel less financially secure due to rising prices or job insecurity, they are less willing to take risks with their money, preferring to conserve it.

Tim Miller asks if there's a 'recession indicator a little bit here' and Rampell responds, 'If people are feeling less flush for other reasons... worried about whether they're going to lose their jobs... they may not be willing to be as risky with their money.'