Trump's Pro-Crypto Policies Fail to Boost Market, $600 Billion Lost

At the start of 2025, the return of Donald Trump to the presidency brought about a significant shift in the government's stance on cryptocurrencies, leading to a series of dramatic market movements. The Trump administration adopted a pro-crypto policy, which included plans to establish a strategic Bitcoin reserve and soften the positions of the Securities and Exchange Commission (SEC).

Despite these pro-crypto measures, the Web 3.0 industry experienced volatility and liquidity outflows, rather than the anticipated prolonged rally. The key question that arises is why the crypto market declined when many believed that a pro-Republican administration would drive growth.

Experts suggest that the market had already priced in the ‘best-case scenario’ and when the anticipated multi-billion-dollar government Bitcoin purchases turned out to be mere verbal commitments with no actual buying, traders rushed to take profits. This classic rule of ‘buy the rumor, sell the news’ played out, leading to a sell-off as the government fund did not start purchasing BTC, removing a strong hypothetical growth driver.

Institutional investors began selling BTC and ETH futures as early as February 2025, locking in profits from December 2024’s peaks. By March, this trend had intensified, and the futures curve flipped into backwardation, a typical signal of declining capital inflows. Simultaneously, Trump launched a trade confrontation, announcing 25% tariffs on Mexican imports and 50% on Canadian imports starting in March. This sparked economic concerns, with treasury yields dropping and the S&P 500 index retreating to post-election lows. Cryptocurrencies, as risk assets, also came under pressure, further intensified by news of a Bybit hack. Analysts note that macroeconomic factors were the primary driver of March’s price decline, overshadowing any positive sentiment from Trump’s actions.

As a result, while the new president’s policies were officially more crypto-friendly, they did not immediately bring a liquidity influx. Instead, speculative excitement gave way to a correction phase. The first weeks of March saw significant capital outflows from the crypto market, impacting funds, exchange-traded products, and decentralized finance (DeFi). In the last week of February, investors withdrew a record amount from US spot Bitcoin exchange-traded funds (ETFs), causing the total cryptocurrency market capitalization to shrink from approximately $3.7 trillion in December to $3.1 trillion by the end of February.

The DeFi sector took a blow, with the total value locked (TVL) in DeFi protocols declining by roughly $45 billion over the winter. The growth accumulated after Trump’s election with TVL reaching $138 billion by December completely evaporated. By March 10, TVL had fallen to $92.6 billion, returning to early November levels. Crypto hedge funds and arbitrage traders faced heavy losses as market structure changes disrupted their strategies. The popular ‘cash-and-carry’ arbitrage between futures and spot markets disappeared, and funds specializing in altcoins were also hit hard. In early March, an anomaly occurred where Bitcoin initially declined more than most altcoins, causing BTC dominance in total market capitalization to drop by five percentage points within a week. However, after the summit, altcoins crashed at an even faster rate, pushing BTC’s dominance back to approximately 61%.

By March, it became clear that the crypto ecosystem capital flows had reversed. Institutional investors and funds were pulling out, falling prices triggered margin liquidations and arbitrage unwinding, and retail investors were scared off by high volatility. All of this reduced available funding for Web 3.0 startups. Venture capital investments, already declining in 2024, fell even further in early 2025. Additionally, regulatory uncertainty remains high. While the SEC has eased its crackdown, no concrete new rules have been enacted yet. A stablecoin regulation bill is expected in August, raising concerns about potential strict oversight for DeFi and stablecoin-related projects. This creates a stressful environment for Web 3.0 businesses, requiring founders to take proactive steps to safeguard their projects.

Given the current landscape, founders should plan for two phases: stabilization and growth. In the stabilization phase, the key priorities are preserving resources, maintaining the team, refining the product, and satisfying existing users. Founders must avoid unnecessary risk. Now is not the time for speculative bets or reckless treasury management. Instead, focus on achievable short-term goals: delivering promised features, fixing issues, and improving UX. This will help maintain and grow an active user base, attracting investors when they return. During the growth phase, as the market rebounds, scaling ahead of competitors will be crucial. This means having a well-prepared strategy for acquiring users and capital. For example, if you’re running a DeFi protocol, plan a liquidity mining program or partnerships with wallets to capture market share when fresh liquidity arrives. If you’re an infrastructure project, collaborate with corporations that may begin integrating blockchain in 2025 as regulations become clearer. Web 3.0 startups should start thinking like Web 2.0 businesses with a clear business model, strong value proposition, and path to profitability. The projects that will thrive are those with real revenue, engaged users, and fundamental utility. Founders should honestly evaluate their projects. If the product doesn’t solve a real problem or lacks product-market fit, it may be time to pivot or merge with other teams before it’s too late. Conversely, if there’s a solid core, doubling down on execution will position the project as a leader when the next cycle begins.

The current crypto market correction, driven by both Trump’s policies and external factors, differs from past downturns due to the heightened role of institutional players and new structural dynamics such as ETFs and arbitrage. Bitcoin now reacts not just to retail demand but also to moves by major funds and governments, introducing new forms of volatility. However, fundamentally, the Web 3.0 industry is gaining something invaluable: political support at the highest level of the US government, even if driven by questionable motives. This lays the groundwork for long-term growth. Challenging months lie ahead, but the projects that navigate the storm will be at the forefront of the next bull run.