Cryptocurrency Sector Dives 12% as Trump-Tied Assets Plummet Amid Regulatory Fears

In a notable divergence from the broader financial markets, the cryptocurrency sector experienced a downturn while stocks and bonds rallied on the back of heightened expectations for a Federal Reserve interest rate cut. This trend was particularly pronounced among digital assets and related equities tied to projects associated with the Trump family, which saw significant declines. The regulatory cloud hanging over DATs company further exacerbated the market's bearish sentiment, as concerns over potential regulatory actions weighed heavily on investor confidence. The combination of these factors created a challenging environment for cryptocurrencies, with the "Trump concept" emerging as a particularly hard-hit area.

On Thursday, digital assets and their related stocks continued their downward trajectory. Notably, assets and enterprises linked to the Trump family's projects experienced the most substantial declines. These assets and enterprises had previously surged due to Trump's pro-cryptocurrency policies. ALT5 Sigma Corp., a holding institution for the WLFI token associated with World Liberty Financial Inc., saw its stock price plummet by 12%, with a cumulative decline of over 50% in the past week. The WLFI token itself dropped by 25%, halving its value since its debut on Labor Day. American Bitcoin Corp., a mining company involving Eric Trump, saw its stock price fall by as much as 22% on its first trading day.

To stabilize market sentiment, World Liberty held an online event on CoinMarketCap, attracting over 2,000 participants. A company spokesperson stated, "The World Liberty team is focused on developing and launching top-tier products like USD1, aiming to bring the power of decentralized finance (DeFi) to millions of users worldwide."

Another factor influencing market sentiment was the concern that regulators might impose restrictions on the numerous "digital asset trust companies" that have emerged in recent months. These companies, which invest in various cryptocurrencies and are publicly listed, have seen their stock prices, known as "DATs" concept stocks, soar after transforming from struggling enterprises.

Reports indicate that, given the majority of these companies are listed on the Nasdaq, the exchange is requiring some cryptocurrency-holding firms to obtain shareholder approval before using stock issuance to fund cryptocurrency purchases. This model, pioneered by Michael Saylor of Strategy, allows companies to increase their cryptocurrency holdings without taking on additional debt.

Other cryptocurrency trust companies, such as those holding Ethereum and Solana, also saw their stock prices decline. Sharplink Gaming, which holds Ethereum, saw its stock price drop by 8.26%, while the Ethereum token itself fell by 3.3%. DeFi Technologies, holding Solana, saw its stock price decrease by 3.88%, with Solana dropping by 3.8%.

Morten Christensen, an investor in the WLFI token and operator of AirdropAlert.com, noted that as the stock prices of cryptocurrency trust companies fall, the value of the underlying cryptocurrencies they hold is also affected. Investors are reassessing the actual value of these tokens on the companies' balance sheets. Christensen added, "I believe there is significant arbitrage between ALT5 Sigma Corp.'s stock and the WLFI token until their valuation ratios return to reasonable levels. My intuition is that traders are closely watching the ratio of ALT5's stock price to the WLFI token price, and short sellers are also profiting from this."

Regarding the WLFI token, Andrew Tu, the business development manager at cryptocurrency market maker Efficient Frontier, stated that some traders were disappointed by the token's final circulating supply, which exceeded expectations. Additionally, investors who bought the token at prices ranging from 1.5 to 5 cents chose to take profits, further exacerbating the token's price decline.

Meanwhile, the latest employment data released on Thursday further confirmed the cooling trend in the U.S. labor market, with employer hiring intentions remaining low in August. Since last autumn, when the Federal Reserve cut interest rates by 100 basis points, it has maintained stable rates due to concerns that tariff policies could drive up prices.

Shiliang Tang, a managing partner at Monarq Asset Management, commented, "From a macro perspective, investors are slightly reducing their risk exposure ahead of tomorrow's U.S. non-farm payrolls data, a key economic indicator before the Federal Reserve's rate-setting meeting later this month."

The cryptocurrency market's "bellwether," Bitcoin, fell by approximately 2% to around 109,800, trading near the lower end of its recent range. Prior to the U.S. presidential election last year, Bitcoin's price was around 69,000. On August 14 of this year, Bitcoin reached an all-time high of slightly over 125,000.