Trump-Backed Crypto Project Plunges $51M Amidst Trade War Tariffs

Crypto Crash: Trump-Backed World Liberty Financial Suffers $51M Portfolio Plunge

World Liberty Financial (WLFI), a crypto project backed by the Trump family, has seen its January crypto investments decline by $51 million, according to sources familiar with the matter. The portfolio plunge comes amidst a broader market downturn triggered by President Trump's tariffs on imports from Canada, Mexico, and China.

The tariffs, which include a 25% levy on Canadian and Mexican imports and a 10% duty on Chinese goods, have rattled global markets and sparked fears of a full-blown trade war. The crypto market has not been immune to the fallout, with Bitcoin and other major cryptocurrencies experiencing significant price drops.

Bitcoin, the world's largest cryptocurrency, fell nearly 4% to $96,038.0 as of 04:32 ET (09:32 GMT) on Monday, following the renewed trade tensions. The decline may seem unexpected, as higher inflation is often viewed as a positive for the cryptocurrency due to its role as a hedge. However, analysts at Bernstein point out that the new tariffs have strengthened the dollar and raised inflation expectations, making near-term interest rate cuts less likely. This has tightened global liquidity, weighing on risk assets, including cryptocurrencies.

Despite the short-term correlation with risk assets, analysts uphold that Bitcoin has a long-term compounding history that showcases its relative value, especially as governments accumulate more debt and deficits, leading to monetary debasement. Still, they note that there is no evidence of Bitcoin being uncorrelated with the market in the short term unless there is a flight to safety from fiat currencies.

Looking ahead, Bernstein expects Bitcoin to trade based on its own fundamentals after the initial risk-on shock is absorbed. The investment bank points out that Bitcoin has consistently held support in the high $90K range after recent sell-offs, bolstered by strong institutional demand.

In January 2025, Bitcoin ETFs recorded a net inflow purchase of $5.3 billion, aligning with the annual forecast of approximately $70 billion in inflows. Meanwhile, MicroStrategy continued its Bitcoin acquisition strategy, purchasing around $2.5 billion worth of Bitcoin and issuing $584 million in perpetual preference shares,