aAs the United States prepares for President Donald Trump’s inauguration on January 20, the virtual currency market is in the spotlight. After the price of Bitcoin hit $100,000 (£81,917) for the first time in history in December 2024, the crypto community is calling for President Trump to fulfill his campaign promise to make the US the “crypto capital of the planet”. I look forward to it enthusiastically. Some analysts predict that Bitcoin’s price could range from $78,000 to $250,000 in 2025.
Blockchain technology has numerous applications beyond cryptocurrency payments, including supply chain and logistics. However, it is the soaring prices of Bitcoin, Ethereum, and “meme coins” that have caught the public’s attention. Speculative demand and the potential for abnormal returns rarely seen in other financial markets remain the main drivers of prices.
Investors are often motivated by the prospect of short-term profits rather than believing in the true or fundamental value of an asset. In the case of meme coins, speculative demand is primarily driven by social media culture and community enthusiasm, with little focus on the utility of the underlying technology or the long-term success of the project.
Institutional investor interest in cryptocurrencies is currently on the rise, driven by expectations of a more favorable regulatory environment under the Trump administration. Major companies such as BlackRock have entered the crypto derivatives market, increasing liquidity and attracting more investors. This industry and political support for cryptocurrencies indicates the growing popularity and acceptance of cryptoassets. At the same time, the speculative nature of crypto assets has raised concerns that political support could inflate bubbles like the dot-com bubble that lasted from 1998 to 2000.
Bubbles in financial markets occur when asset prices rise so far above their fundamental value that they no longer reflect their actual risks. When these bubbles burst, they can create a contagion effect and cause the collapse of related securities, even in industries not directly related to the asset in question.
In my research, my fellow authors and I analyzed companies that rebranded with crypto-related names to increase their stock prices, even though their business models remained unchanged. This superficial relationship made these companies susceptible to influence from the broader cryptocurrency ecosystem. If investors did not investigate whether these companies were indeed adopting blockchain technology, they would be quick to pull out of these stocks at the first sign of negative news or crisis in the crypto market. It may be sold.
As institutions such as investment management companies and banks become more involved, other industries become increasingly at risk of a crypto market crash such as the one caused by the collapse of Terra Luna and FTX in 2022. There is. Silicon Valley Bank (SVB) Bankruptcy in 2023 This illustrates how interconnected vulnerabilities in technology, venture capital, and speculative markets destabilize banks, especially those with concentrated exposure to high-risk sectors. This is a remarkable example of how to make the world a better place. In 2025, the threat of contagion is stronger than in the early days when crypto markets were more isolated.
Infection flows in both directions. After SVB’s collapse, cryptocurrency firm Circle, issuer of the popular stablecoin USDC, reported that it held $3.3 billion of its reserves in SVB. As a result, USDC temporarily lost its peg to the US dollar as the market feared that USDC would face liquidity issues and would not be able to redeem USDC into US dollars. The incident highlighted how the close relationship between the cryptocurrency sector and traditional finance increases the vulnerability of both sectors and raises concerns about overall financial stability.
Even if supposedly stable crypto assets such as USDC, Tether, and Terra Luna are immune to depegging or collapse, meme coins driven purely by social media hype and celebrity endorsements are Furthermore, it is easy to fall into a speculative bubble.
Trump ally Elon Musk has endorsed a number of meme coins via Twitter/X, and the billionaire recently changed his name on The price of one Cecius soared by more than 700%. Social media influencer Logan Paul has been investigated by the BBC for endorsing multiple meme coins on his YouTube channel. Paul denies any wrongdoing.
The promotion of cryptocurrencies, especially by influential people, artificially inflates the price of a coin through hype and sometimes misinformation (“pumping”), selling large holdings at peak times and leaving behind the rest. It is an important element of pump-and-dump schemes. An investor who loses money due to a collapse in prices (a “dump”). In the case of Paul and other celebrities, there are allegations of undisclosed financial interests in meme coins. Celebrities should refrain from encouraging their followers to invest in cryptocurrencies without transparently disclosing their financial involvement. Especially if you plan to sell the assets later, which could result in financial loss to your followers.
At the core of the cryptocurrency ethos is the desire for financial freedom. It is about enabling peer-to-peer transactions without relying on central banks or financial intermediaries and promoting greater economic freedom. However, paradoxically, crypto investors often blindly trust the opinions of influencers on social media, leading to them investing in high-risk speculative assets that can have dire consequences for investors. is common. In the 2022 cryptocurrency market crash, many amateur investors lost their investment funds and, in some cases, their entire life savings, with a dramatic impact on their lives and mental health.
The US financial market regulator Securities and Exchange Commission (SEC) has launched multiple investigations into celebrities promoting cryptocurrencies without disclosing their financial interest in the project. However, former SEC Commissioner Gary Gensler has resigned, and President Trump intends to nominate Paul Atkins, a well-known cryptocurrency enthusiast, to become SEC Chairman.
Such a change would be welcomed by the cryptocurrency community as it could push up the price of crypto assets and increase profits. At the same time, there is concern that the regulatory authorities’ views and actions may change regarding market manipulation and insider trading that occur in the virtual currency market using social media. If the SEC turns a blind eye in 2025, especially if the meme coin bubble bursts again, consumers may not be protected from financial loss at all.
Deregulating cryptocurrencies will not advance the ideal of economic freedom. Rather, it would be a significant setback in the quest for transparency and accountability in addressing financial wrongdoing by the rich and powerful. Strong political and government support for cryptocurrencies may paradoxically threaten its decentralized spirit and ultimately undermine the attractiveness of cryptoassets.
The crypto market is likely to go mainstream this year, but those dabbling on the fringes may face unfulfilled expectations at best and hardship at worst.
Larisa Yarovaya is Associate Professor of Finance and Director of the Center for Digital Finance at Southampton Business School.
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