Today, Assemblywoman Maxine Waters (D-CA)the top Democrat on the House Financial Services Committee, released information on the 21st day of the Trump-Republican shutdown – which Trump and the Republicans initiated because of their refusal to negotiate with Democrats to protect the health care of millions of Americans. Today’s release highlights how the ongoing shutdown has made average American investors more vulnerable to another sudden crypto crash, especially with the Securities and Exchange Commission (SEC) effectively shut down as a result of the shutdown.
What happened?
On October 10, cryptocurrencies dived in value during a brief but significant flash crash that left investors with billions of dollars in losses. The crash follows Trump’s threat to impose 100% tariffs on imports from China, as well as new export controls targeting what he calls “critical software.” Scared by the news and with traditional markets closed for the day, investors turned to abandoning their cryptocurrencies, like bitcoin and memecoins, in favor of perceived safe havens like government-issued Treasury bonds and gold. While the Nasdaq Composite fell 3.56% and the S&P 500 recorded its worst day since April, crypto saw the biggest drop:
- Bitcoin fell approximately 14.6% on the afternoon of October 10.
- Ethereum, the world’s second-largest cryptocurrency by market value, fell around 21%
- Dogecoin fell over 50%
- President Donald Trump’s $TRUMP coin fell about 63% to its lowest point
Although crypto has recovered slightly, average and institutional investors still suffered huge losses. This highlights the volatility in the crypto market that Ranking Member Waters has long warned about. These risks are only amplified as Trump and congressional Republicans work to integrate crypto into the traditional financial system without first establishing the proper guardrails, increasing the likelihood of future crashes like this that could spread more quickly to traditional finance.
How does the Trump-Republican gridlock expose investors to even greater risk?
Just as worrying, amid the Trump-Republican shutdown, the SEC and Commodity Futures Trading Commission (CFTC) are effectively shut down. Ranking Member Waters covered the dangerous consequences of the SEC shutdown on Day 8. With 90% of the agency’s employees furloughed and most activities suspended, the SEC currently lacks the resources and personnel to respond to emergencies like this.
In fact, the crash has raised serious and legitimate concerns about possible insider trading and, in particular, whether any cryptocurrency trader received information about upcoming pricing announcements. As Molly White explainFollowing the crash, analysts noticed a wallet that had deposited millions into decentralized exchange Hyperliquid before the crash, taking a heavily leveraged short position in bitcoin and ether. When the market crashed, they made profits of over $150 million.
This very serious allegation requires a thorough investigation by Wall Street cops. The SEC and CFTC should work diligently to get to the bottom of the flash crash, determine whether wrongdoing occurred, and hold criminals accountable for insider trading or market manipulation.
Unfortunately, with the agency closed during the Trump-Republican shutdown, oversight is blocked and we may never get answers to these important questions. This leaves our markets and average investors without essential protection and vulnerable to another disastrous collapse.
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