Along with the issues that cryptocurrencies already encounter to try and integrate as a functional aspect of the worldwide economy, there seems to be a new hurdle to surmount: the damaging effects that politicians tend to bring. Experts are now starting to worry about the consequences such actions might bring forward, especially from prominent figures like the United States President Donald Trump or Argentinian president Javier Milei endorsing particular cryptocurrencies and propelling their market further, stating that it would only increase speculation and hurt an already fragile industry standing.
The Danger of Political Endorsements: Image Deterioration
“Every aspect of the crypto world is suffering,” claimed Claire Balva, strategy director for blockchain’s Deblock. Balva’s statement captures Cassatt’s concerns that these political figures, intended to help out the economy, are instead left shaping a world that will be perceived as a lawless, barbaric land rife with speculative investments.
Milei’s $LIBRA Endorsement: Claims of Fraud
The case of Argentine President Javier Milei and the cryptocurrency $LIBRA serves as a primary example. Reports suggest that Argentinian authorities are looking into whether or not Milei promoted the $LIBRA token on social media in February as part of a fraudulent scheme. Ethically bound to maintain certain responsibilities, it appears his social media action may have overstepped some boundaries. The market responded positively to Milei’s endorsement, with the token’s value surging from just a few cents to nearly five dollars. However, this value collapsed once Milei deleted his posts. This collapse left many investors suffering significant financial losses; Milei’s endorsement was supposed to help them.
Milei’s Response: A Matter of Personal Discretion
As per Milei’s explanations, he stands firm on the accusations, stating he did not ‘promote’ the token and the financial losses are a ‘matter between private individuals’ since publicly he does not have an obligation. Such reasoning is considered borderline delusional. Indeed, good faith is a strong argument, but given the blowout losses along with alleged manipulative intent, he will have less sympathy than assumed.
The Rise and Fall of $LIBRA: A Cautionary Tale
The $LIBRA saga attempts to highlight the dangers in the turbulent and largely unregulated market of cryptocurrencies. Following Milei’s initial endorsement, the hype around $LIBRA led to a surge of interest among investors. Many early adopters liquidated their portfolios, resulting in a profit, which triggered a domino effect that destroyed $LIBRA’s value. Subsequent buyers suffered massive losses. Moreover, the debacle thrashed the value of several cryptocurrencies, including Bitcoin, revealing the extent of reliance and sensitivity the crypto market has to each other.
Trump’s Memecoin Experiment: Questionable Legitimacy
In my perspective, Trump’s dive into the memecoin in the form of the $TRUMP token serves as an added layer of concern. According to the Financial Times, TRUMP garnered sufficient attention, generating no less than $350 million for Trump. However, analyzing that number reveals around 810,000 buyers losing a combined total of over $2 billion, according to the crypto data group Chainalysis. These figures emphasize the lack of value driving behind memecoins and the sheer rate of frenzied speculation encircled by risky tendencies that lead them to operate on such barbaric levels.
A Backlash Against Legitimacy? The Contradictory Dynamics
Political personalities such as Trump are, in a manner of speaking, supposed to assist the legitimacy of this sector. “On paper, his support for crypto projects could boost the sector’s legitimacy,” the article observes. Yet, as a director at the Centre for Digital Finance at Southampton Business School, Larisa Yarovaya presented a counterargument: “But at the same time, it can backfire.”
The Looming Dangers: Conflicts of Interest and Vulnerability
Potential conflicts of interest and the fundamental fragility of the crypto market are concerns that Yarovaya’s warning highlights. Any politically affiliated scandals, hacks, or speculative assaults on coins can severely undermine public trust and amplify damage to the market’s credibility.
The Car’s $CAR: A Precursor to Concern
Memecoin $CAR, which was launched in February by the Central African Republic, was also noted in the article. Balva noted with alarm that “the domain name had been reserved only a few days before,” which “shows that there was too little preparation.” The Central African Republic’s position is important because they were the second country to adopt bitcoin as legal tender after El Salvador—not for long, however.
The Absence of a Safety Net: Relying on Trust
Unlike old-fashioned markets with complex rules and regulations, the cryptocurrency market operates on ‘trust’ for its advocates, endorsing the trading and acceptance of cryptocurrency. Maximilian Brichta, a doctoral student of communications at the University of Southern California, notes that without some authoritative body, the system relies on the trustworthiness of the people who champion it.
The “Rigged Game” Allegations: Price Manipulation
The piece examines the problem of price manipulation, especially the concern that many traders use automated bots to buy newly listed tokens as early as possible to dump them for a quick profit. Milei’s defense that “losses are akin to gambling” attracted backlash. The rebuttal, as described by Balva, is that the “game” is “rigged from the beginning.”
A Crucial Safeguard: Transparent Tokenomics
“Manipulation,” Balva goes on to explain, “can be avoided when ‘first investors…are not allowed to sell their stake for several years.’” However, with regard to $LIBRA, “more than 80 percent” of the distributed tokens were with “a few large holders who controlled all the liquidity and could liquidate it all at any time.” Balva called this “monumental recklessness or outright fraud,” identifying the risk of token launches while claiming abuse without sufficient scrutiny and the lack of safeguards against exploitation.
Conclusion: A Crossroads for Credibility
The article suggests the cryptocurrency industry is at a legislative crossroads. Political attention can certainly boost an industry’s image in the short term but can be detrimental in the long run.
Furthermore, to gain public credibility and achieve consistent growth, overcoming market volatility is a given. It will also require a market structure that centers on disclosure, ethical government token allocation, and strategic non-speculative investment in cryptocurrencies.
