Trump's Crypto Endorsement: A Risky Bet for ETH Investors

The cryptocurrency market has always been a rollercoaster ride, but the recent 45% crash in Ethereum (ETH) since Eric Trump's endorsement has added a new layer of complexity. Peter Schiff, a prominent economist known for his skepticism towards digital currencies, has warned investors against taking investment advice from the Trump family. His cautionary words come at a time when the cryptocurrency market is grappling with broader economic uncertainties and geopolitical tensions.



The Trump family's involvement in the cryptocurrency market has been a subject of intense debate. Eric Trump's bullish sentiment towards Ethereum, expressed in a tweet, seemed to boost the cryptocurrency's price temporarily. However, the subsequent crash has raised questions about the reliability of such endorsements. Schiff's skepticism towards the Trump family's involvement in the cryptocurrency market aligns with his broader economic philosophy, which is characterized by a cautious approach to fiat currencies and a preference for tangible assets like gold. He has been vocal about his concerns regarding the devaluation of fiat currencies and the risks associated with digital currencies. In a tweet, Eric Trump expressed bullish sentiment towards Ethereum, stating, “In my opinion, it’s a great time to add $ETH.” However, Schiff's skepticism towards such endorsements is evident in his criticism of government policies and his advocacy for a return to a gold standard. He has warned against the risks of investing in digital currencies, which he believes are subject to market volatility and lack the stability of precious metals.

The implications for investors considering ETH are significant. Schiff's views suggest that investors should be cautious about the potential risks associated with digital currencies. For example, the Trump family's involvement in the cryptocurrency market, as seen in the transfer of $307 million in crypto to coinbase Prime, including $212.6 million in ETH, raises questions about the long-term viability of these investments. Schiff's skepticism towards such endorsements and his preference for tangible assets like gold highlight the need for investors to carefully consider the risks and potential rewards of investing in ETH. As Schiff has stated, "Adding ETH to my list of things not to buy," his views underscore the importance of conducting thorough research and considering alternative investment options.

The 45% crash in ETH since Eric Trump's endorsement can be attributed to several specific factors that reflect broader market trends and investor sentiment. Firstly, the overall negative investor sentiment in the market has been a significant contributor. According to analysis by Santiment, the ongoing fear, uncertainty, and doubt (FUD) surrounding the cryptocurrency market have prompted many retail traders to offload their ETH holdings. This is evidenced by the trading volume of Ethereum dropping by 20%, with only 15.2 million ETH being traded on February 8, 2025, which is a sharp decrease from the monthly average of 19 million ETH. This hesitation among investors has put downward pressure on the price of ETH.

Secondly, the decline in network activity has also impacted Ethereum's price. Key metrics such as active addresses and transaction volumes have both seen declines, down by 12% and 18%, respectively. These drops signal lower demand and participation in the Ethereum network, which has contributed to the bearish outlook for ETH. For instance, the number of new addresses on the Ethereum network dropped from 93,840 wallets on July 27, 2024, to 82,540 on August 3, 2024, and the average number of active addresses dropped by 13.5% from 486,740 on July 5, 2024, to 421,259 on August 2, 2024. This decline in network activity suggests that some investors prefer gaining exposure to Ether through the funds rather than directly buying and owning the token.

Thirdly, the broader market volatility and macroeconomic headwinds have also weighed on Ethereum prices. For example, U.S. President Donald Trump’s trade war threats rattle global markets, and the crypto market appears to be following broader financial markets lower as risk appetite decreases among investors. This is reflected in the outflows from Ethereum investment products, which have reached $430 million since the market debut of US-based spot Ethereum ETFs on July 23, 2024. Additionally, the bearish sentiment is also reflected in prediction markets, with Polymarket bettors giving a 76% chance of ether hitting $1,900 by the end of March 2025, suggesting further downside may be ahead.

Lastly, the technical indicators also point to further uncertainty for Ethereum. The Relative Strength Index (RSI) for ETH/USD currently stands at 32, which signals that Ethereum may be oversold. However, other indicators are less optimistic. The Moving Average Convergence Divergence (MACD) has shown a bearish crossover, indicating that the downtrend is still in play. Moreover, the widening of the Bollinger Bands suggests that increased volatility is expected, which could lead to significant price swings in either direction. On February 8, 2025, Ethereum briefly dipped to $2,140 before rebounding to $2,620. However, it remains 37% below its peak price of $3,490 from December 2024, which further fuels the concern that ETH’s price could continue to struggle in the short term.

In conclusion, the recent crash in Ethereum highlights the risks associated with taking investment advice from high-profile figures without conducting thorough research. Peter Schiff's cautionary words serve as a reminder that the cryptocurrency market is subject to significant volatility and that investors should be wary of endorsements from those with vested interests. As the market continues to evolve, it is crucial for investors to stay informed and make decisions based on sound analysis rather than hype or speculation.