@SmilingGecko fyi re crypto
Investors are often motivated by the prospect of short-term profits rather than a belief in the asset’s true or fundamental value. In the case of meme coins, speculative demand is primarily driven by social media culture and community enthusiasm, with little focus on the utility of the underlying technology or long-term success of the project.
Fuelled by expectations of a more favourable regulatory environment under the Trump administration, there is now increased institutional interest in cryptocurrencies. Major players such as BlackRock are entering the crypto derivatives market, increasing liquidity and drawing even more investors. This industry and political support for cryptocurrency demonstrates higher adoption and greater acceptance of crypto assets. At the same time, the speculative nature of crypto assets raises concerns that political endorsements could inflate a bubble, similar to the dotcom bubble that lasted between 1998 and 2000.
Financial market bubbles occur when asset prices far exceed their fundamental values and no longer reflect actual risks. When these bubbles burst, they can trigger a contagion effect, causing the collapse of related securities – even in industries with no direct connection to the troubled assets.
In my research, alongside fellow authors, I analysed companies that had rebranded with crypto-related names to boost their stock prices, despite no changes to their business models. This superficial association made these companies susceptible to contagion from the broader crypto ecosystem. If investors did not investigate whether these companies genuinely adopted blockchain technology, they are likely to sell these stocks swiftly at the first sign of negative news or a crisis in the crypto market.
With growing institutional involvement, including investment management companies and banks, other industries are becoming increasingly exposed to the risks of a crypto market crash, such as those caused by the Terra Luna and FTX collapses in 2022. Silicon Valley Bank’s (SVB) bankruptcy in 2023 serves as a notable example of how interconnected vulnerabilities in tech, venture capital and speculative markets can destabilise banks, particularly those with concentrated exposure to high-risk sectors. In 2025, contagion threat is getting stronger than in the early days when crypto markets were more isolated.
Contagion flows in both directions. After SVB collapsed, crypto company Circle, the issuer of the popular stablecoin USDC, reported that it held $3.3bn of its reserves in SVB. As a result, USDC temporarily lost its peg to the US dollar, as markets feared the company might face liquidity issues, making it impossible to redeem USDC for US dollars. This incident highlights that those closer linkages between the crypto sector and traditional finance increase vulnerabilities in both sectors, raising concerns about overall financial stability.
Even if supposedly stable crypto assets such as USDC, Tether and Terra Luna are not immune to depegging or collapse, then meme coins – driven purely by social media hype and celebrity endorsements – are even more prone to speculative bubbles.
Trump ally Elon Musk has endorsed numerous meme coins via Twitter/X and recently the billionaire changed his name to “Kekius Maximus” on X, causing the price of the respective token, Kekius, to surge by over 700%. Social media influencer Logan Paul has been investigated by the BBC for endorsing multiple meme coins on his YouTube channel. Paul denies any wrongdoing.
Crypto promotion, particularly by influential figures, is a key component of pump-and-dump schemes that involve artificially inflating the coin’s price through hype or occasionally even false information (“pump”) and then selling off large holdings at the peak, leaving other investors with losses as the price crashes (“dump”). In the case of Paul and other celebrities, there are allegations of undisclosed financial interests in meme coins. Celebrities should refrain from encouraging their followers to invest in any cryptocurrency without transparently disclosing their financial involvement – especially if there are some plans to sell the asset later, potentially causing financial losses for their followers.
A core part of the cryptocurrency ethos is the aspiration for financial liberty: enabling peer-to-peer transactions without reliance on central banks or financial intermediaries, and promoting higher financial freedom. Yet, paradoxically, crypto investors often blindly trust the opinions of influential figures on social media, investing in high-risk, speculative assets with often disastrous consequences for investors. During the crypto market crash of 2022, many amateur investors lost their investments, and in some cases, their life savings, which had a drastic impact on their lives and mental health.
The Securities and Exchange Commission (SEC), the US financial market regulator, has launched several investigations into celebrities promoting cryptocurrencies without disclosing their financial interests in the projects. However, the former head of the SEC, Gary Gensler, has resigned, and Trump intends to nominate Paul Atkins, a known crypto enthusiast, to chair the SEC.
Such changes would be welcomed by the crypto community for potentially driving up crypto asset prices and boosting their profits. At the same time, it is concerning since it might change how regulators view and act on market manipulation and insider trading happening in crypto markets with the help of social media. If, in 2025, the SEC turns a blind eye, consumers could be left entirely unprotected from financial losses – especially when another meme coin bubble bursts.
Easing cryptocurrency regulations would not advance the ideal of financial freedom. Instead, it would mark a significant step backward in the pursuit of transparency and accountability in addressing financial misconduct by the wealthy and powerful. Strong political and government endorsements of crypto, paradoxically, pose a threat to its decentralisation ethos and could ultimately undermine the appeal of crypto assets.
This year, the crypto market is likely to go mainstream, but those who dabble at the fringes may be met with unmet expectations at best and challenges at worst.
Larisa Yarovaya is an associate professor of finance and director of the Centre for Digital Finance at Southampton Business School
