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The Trump administration’s embrace of cryptocurrencies is helping fuel a speculative mania that could cause “havoc” when prices collapse, hedge fund Elliott has warned.
The $70bn-in-assets firm took aim at the US government’s apparent enthusiasm for assets that have soared in price but have “no substance”, and also at politicians who are supportive of cryptocurrencies that could eventually become a rival to the US dollar, according to an investor letter seen by the Financial Times.
The fund “has never seen a market like this”, wrote Elliott, referring to the speculative investor frenzy it believes is currently gripping financial markets. It pointed to the artificial intelligence boom and high equity market valuations as signs of investors “acting like a crowd of sports bettors”.
“Crypto is ground zero” for the speculative surge across markets, not only due to the size it has grown to but also because of its “perceived proximity to the White House”, it added.
The “inevitable collapse” of the crypto bubble “could wreak havoc in ways we cannot yet anticipate”, it said.
Elliott’s criticism of the White House’s stance on crypto comes despite the fact that the firm’s founder, Paul Singer, is a longtime Republican donor who donated $56mn to conservative candidates in the 2024 election cycle, according to website OpenSecrets.
Singer, who has long warned of the dangers of crypto, has in the past been critical of Donald Trump’s economic policies. However, he donated $5mn to the “Make America Great Again” political action committee in the last election, whose goal was to support Trump.
Cryptocurrency prices have rallied hard since Trump’s election in November, after he promised he would make the US “the bitcoin superpower of the world”. Bitcoin surged from about $70,000 before the election to a record high of more than $100,000.
After his inauguration Trump signed an executive order to promote US “leadership in digital assets and financial technology while protecting economic liberty” and tasked a working group with evaluating the creation of a national digital asset stockpile.
Elliott’s letter also points to the “immense advantage” the dollar enjoys as the world’s reserve currency, and questioned why the US government would encourage the take-up of alternatives at a time when other countries are already trying to wean themselves off the greenback.
For any elected official to support “marginalising the dollar” was “profoundly dangerous”, wrote Elliott, highlighting the hundreds of millions of dollars spent helping politicians who were sympathetic to crypto get elected.
For instance, the Fairshake political action committee, which works to get pro-crypto candidates elected on both sides of the political aisle, spent $173mn in the 2023-2024 election cycle, according to OpenSecrets.
Trump’s own businesses have extended their links with the cryptocurrency markets. Alongside his sons and longtime business partners, Trump backed a crypto platform called World Liberty Financial last year, and earlier this month he and first lady Melania Trump both launched memecoins — a type of cryptocurrency with no underlying business model or cash flow.
Trump Media, in which the president owns a majority stake, said on Wednesday it would expand beyond social media and launch a financial services business that would invest up to $250mn into cryptocurrency and other assets.
Elliott, founded by Singer in 1977, is known as a fearsome activist investor, which takes on companies and even countries in heated boardroom or legal battles.
Elliott declined to comment.
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