Bitcoin, Shiba Inu, and Pepe Coin Face 2 Big Risks as Trump Takes Office

Cryptocurrency prices soared on Monday, continuing a rally that saw Bitcoin briefly cross $102,000 for the first time in over two weeks. The fear and greed index also moved into the greed zone.

However, these gains were wiped out on Tuesday as Bitcoin, Shiba Inu, Pepe and other coins crashed. Here are two potential risks that could further crash these coins.

Soaring US Bond Yields

The first major reason that could lead to more crypto downturn is the performance of the bond market. The chart below shows that the US 30-year, 10-year and 5-year Treasury yields have surged to their highest levels since October 2023.

Data showed that the 30-year yield moved to 4.91% and could hit 5% this week. Meanwhile, the 10-year and 5-year yields soared to 4.68% and 4.46%. These increases are noteworthy because they come at a time when the Federal Reserve is in a rate-cutting cycle.

The bank slashed rates by 1% last year and guided towards two more cuts this year. In theory, yields should fall when the Fed is cutting rates. Hence, their continued increase is a sign that the market believes the Fed may not cut rates as guided since inflation is no longer falling. Donald Trump's policies of tax cuts, mass deportations and tariffs will worsen the situation.

I have argued that most asset markets appear overvalued, bordering on frothy. Stocks, corporate bonds, single family housing, crypto and gold quickly come to mind. But what could be the catalyst for them to selloff? How about a meaningful correction in the Treasury bond market.

Risky assets rarely do well when bond yields rise as capital tends to flow into money market funds, which have now clocked up over $6.8 trillion in assets.

Hence, the next few days will be crucial, as the Fed will also release minutes of its last meeting, and the US will also report December inflation and jobs data. Strong numbers will bolster the Fed's hawkish tone, putting more pressure on coins like Bitcoin, Shiba Inu and Pepe Coin.

Bitcoin, Shiba Inu and Pepe Coin SEC Risk

The other major risk these coins face is from the Securities and Exchange Commission. On paper, the incoming Trump administration is expected to be highly positive for the cryptocurrency industry.

Trump has already nominated Paul Atkins to be the next SEC Chair, David Sachs to lead a crypto and AI council and Howard Lutnick to head commerce. He is also close to Elon Musk, a key crypto supporter whose companies like Tesla and SpaceX own Bitcoin.

The SEC is expected to maintain a light-touch approach to crypto regulation, which could spur animal spirits among investors in the industry.

However, as The Atlantic put it, deregulating the crypto industry may create a bubble that will ultimately bust, hurting many investors.

The other risk is that Atkins' policies may hurt the industry if they fall short of expectations. For example, many cryptocurrency investors are expecting him to drop the Ripple appeal and approve several crypto ETFs. If he fails or delays, there is a chance that most coins will decline.

On the bright side, history shows that cryptocurrencies tend to perform well irrespective of who is president. For example, Bitcoin just hit a record high despite anti-crypto Gary Gensler being the head of the SEC.