How the Elon Musk–Trump Conflict Impacts the Crypto Market

Elon Musk vs. Trump: A Political Stress Test for the Crypto Market

On June 5, 2025, a public feud between former U.S. President Donald Trump and tech mogul Elon Musk sent shockwaves through financial markets. Within 24 hours, Tesla shares plummeted by 14%, wiping out $152.5 billion in market value. Bitcoin dropped over 3% to $100,000, while Ethereum fell by 7%, and crypto liquidations across the board totaled $983 million. What began as a policy disagreement—such as the cancellation of EV tax credits—has revealed the unprecedented impact of political figures’ remarks on the crypto market and highlighted the fragility of emerging assets under macro-level political pressure.

This market insight article discusses the chain reaction triggered in the crypto market by the Elon Musk–Trump feud and analyzes the associated investment risks and institutional strategies in political power struggles.

Root of the Conflict: Triple Fracture of Policy Interests and Crypto Stances

The main trigger is a conflict over economic policies. Trump’s newly signed tax reform bill prematurely ends EV tax credits by 7 years, directly impacting Tesla’s annual profit expectations (a $1.2 billion loss), while the 145% tariffs on Chinese imports further strain Tesla’s supply chain. Musk took to social media to slam the policy as “undermining DOGE reform,” tying his business interests with pro-crypto stances.

Crypto strategy divergence further escalated tensions. Musk promotes Dogecoin (DOGE) as a “people’s cryptocurrency,” and his Department of Government Efficiency (DOGE) adopted a Shiba Inu logo to reinforce the connection. Meanwhile, in March 2025, Trump announced the creation of a strategic Bitcoin reserve and categorized seized Bitcoin as national assets—ignoring DOGE. This divergence turned DOGE into a “political sentiment barometer”—it dropped 22% during the conflict but quickly rebounded after signs of reconciliation.

As the power struggle escalated, the surface-level alliance crumbled. Musk declared, “Trump will lose with my $300 million donation,” prompting Trump to threaten the cancellation of SpaceX’s military contracts. Their fallout climaxed with a veto clash over the NASA administrator nomination.

Market Transmission Mechanism: Vicious Cycle of Liquidation and Sentiment Pricing

The crash followed a three-layer transmission pattern:

1. Stock-to-Crypto Leverage Cascade: Institutional investors sold Tesla shares to cover margin calls, which dragged down crypto-related stocks like MicroStrategy. This caused Bitcoin to break the $100.5K support level, leading to $892 million in long liquidations (90% of total).

2. Political Tokens Crash: Trump-linked token TRUMP dropped 37% in a single day, while Biden-themed BODEN followed with a 23% decline, revealing the extreme risk of meme coins tied to political figures.

3. Institutional Flight to Safety: Bitcoin ETFs saw $50 million in single-day net outflows—the highest since March. Mining stocks like Marathon Digital fell over 5%, indicating increasing correlation among risk assets.

This chain reaction exposed the emotional pricing flaw in crypto markets—where low liquidity (e.g., TRUMP token depth at only $570K) makes them prone to irrational crashes driven by political remarks.

The Survival Crisis of Political Tokens: Regulation and Value Reset

The clash accelerated the trust collapse of politically themed tokens:

• Regulatory Pressure Mounts: The U.S. SEC may classify political meme tokens as “unregistered securities,” referencing the Dogecoin lawsuit precedent. Hong Kong’s SFC has banned licensed exchanges from listing such tokens, cutting off Asian institutional capital.

• Projects Rapidly “Depoliticizing”: Multiple campaign token teams issued statements denying affiliations with any candidates. TRUMP token developers scrubbed political content from their website and pivoted toward community governance narratives.

This trend is forcing a reassessment of token value anchors: when politicians flip positions (e.g., Trump switching from anti- to pro-Bitcoin), token prices can diverge completely from fundamentals and become speculative instruments.

Investors can monitor global regulatory trends in real-time via the JuCoin Compliance Center to avoid policy risks.

Investment Strategy Restructuring: Three Verified Hedging Paths

The conflict validates three effective risk-hedging strategies:

1. Volatility Arbitrage: Bitcoin’s 1-month implied volatility surged to 89%, with put option volume up 220%. Some institutions profited by selling call options to capture premium.

2. Stablecoin Rotation: USDT and DAI saw a 47% jump in daily on-chain transfers. Stablecoin reserves on exchanges hit a record $78 billion, indicating a short-term shift to safety.

3. Regulation-Resilient Asset Allocation: While BTC spot ETFs saw outflows, compliant DeFi protocols like AAVE and Compound saw TVL increase 12%, showing a move toward assets with stronger regulatory backing.

For retail investors, event-driven portfolio management is advised: reduce exposure to high-risk assets to below 15% ahead of key political dates (e.g., Trump’s June 15 speech on crypto policy).

Future Implications: Institutionalization and Depersonalization

The Musk–Trump feud signals two turning points for crypto:

• Decentralized Institutional Lobbying: Platforms like Coinbase are increasingly engaging with a diverse array of politicians, including VP Vance, to avoid over-reliance on any one figure. Lobbying budgets are shifting from donations to legislative support, such as bipartisan efforts for the “Digital Asset Tax Clarity Act.”

• Decoupling Token Value from Personalities: Tokens with real on-chain utility (e.g., ETH, SOL) saw 58% smaller declines than personality-driven tokens during the conflict, proving utility > celebrity. Developers now prefer linking tokenomics to protocol revenue (e.g., GMX fee-sharing) rather than celebrity endorsement.

If political intervention becomes routine, the crypto market may bifurcate into “policy-sensitive” (meme coins, mining stocks) and “policy-neutral” (L1 native tokens, RWAs) asset classes, requiring investors to recalibrate portfolio risk exposure.