For months, crypto enthusiasts poured billions into leveraged strategies, banking on President Donald Trump’s promise to deregulate the cryptocurrency industry and ignite a new era of digital wealth. However, the optimism that fueled post-election gains has given way to a sobering reality. Day traders betting heavily on cryptocurrencies are now reeling from a brutal Wall Street selloff, driven by fears over Trump’s unpredictable policy agenda and unmet expectations for the crypto sector.

Market Turmoil Hits Leveraged ETFs

Exchange-traded funds (ETFs) designed to amplify returns on cryptocurrencies and related assets have been among the hardest hit. On Monday, two ETFs tied to Strategy—formerly MicroStrategy, a prominent Bitcoin-holding company—plunged over 30%. Another fund, doubling the daily returns of Robinhood Markets Inc., a popular brokerage among crypto traders, cratered by 40%. Leveraged Bitcoin and Ether funds also saw steep declines of approximately 20% and 26%, respectively, amid a broader selloff in digital tokens.

These losses reflect a sharp reversal for a crypto-trading ecosystem that surged after Trump’s return to the White House. The president’s pro-crypto rhetoric, including pledges for a national strategic reserve of digital tokens and the launch of his own memecoin, had initially sent Bitcoin and other cryptocurrencies soaring. Yet, recent developments have dampened the enthusiasm.

Disappointment in Trump’s Crypto Vision

Industry insiders are voicing growing unease about the administration’s early moves. The inclusion of lesser-known tokens like XRP, SOL, and ADA in the proposed cryptoreserve has sparked dismay. A highly anticipated White House crypto summit last Friday further disappointed observers, with Blockworks’ Donovan Choy and Macauley Peterson describing it as “big on optics, light on substance.” As one analyst noted, “We’re still very much in wait-and-see mode.”

Compounding the uncertainty, Trump’s broader policy shifts—such as fluctuating trade threats and Elon Musk’s aggressive push to slash federal spending—have rattled investors. The S&P 500 has erased all gains since the election, with speculative “Trump trade” assets suffering even steeper declines.

Recession Fears Amplify the Pain

Economists are increasingly sounding the alarm about a potential downturn. A JPMorgan Chase & Co. model pegged the market-implied recession probability at 31% earlier this month, while Goldman Sachs Group Inc.’s metrics also signal rising risks. In this climate, high-risk, leveraged ETFs tied to crypto and speculative tech names are becoming less appealing. “You’re not going to want too much exposure to high-beta names like these,” warned Todd Sohn, senior ETF strategist at Strategas.

President Trump has suggested that current market turbulence may be a “transition” as his policies take effect. Michael O’Rourke, chief market strategist at JonesTrading, agrees that speculative assets are being “aggressively unwound.” He added, “These are leveraged wagers—literal gambling on the most speculative parts of the equity market. Their sharp rise should have signaled they could collapse just as quickly, if not faster.”

Performance Snapshot of Key Funds

  • Leveraged Strategy ETFs: Down approximately 45% year-to-date.

  • GraniteShares 2x Long COIN Daily ETF (CONL): Tied to Coinbase Global Inc., down over 55% since December 2024.

  • Double-Leveraged Bitcoin Fund (BITX): Lost 35%, mirroring Bitcoin’s 16% drop.

  • iShares Bitcoin Trust ETF (IBIT): Recorded $2.6 billion in inflows in early December but saw outflows of nearly $800 million in February, with an additional $130 million withdrawn in March.

  • Direxion Daily TSLA Bull 2X Shares (TSLL): Down more than 70% this year amid Tesla’s struggles.

  • ARK Innovation ETF (ARKK): Lost 16% year-to-date, with $240 million in outflows following two years of nearly $4 billion in redemptions.

    High-octane tech funds tied to Elon Musk and Palantir Technologies Inc. also saw significant losses, with some dropping 20% on Monday alone.

A Sentiment-Driven Market

Despite the pro-crypto leanings of the Trump administration, experts caution that cryptocurrencies remain high-risk assets heavily influenced by sentiment rather than fundamentals. “There are long-term growth drivers for crypto, but its pricing is still built on faith,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. “It’s hard to stay confident in crypto when broader market concerns are mounting.”

Conclusion

The crypto day-trading faithful who once saw Trump’s presidency as a golden opportunity are now grappling with a starkly different landscape. As leveraged funds hemorrhage value and recession fears loom, the promise of a deregulated crypto paradise remains elusive—for now.

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