The Trump administration’s support for cryptocurrencies is contributing to a speculative frenzy that could lead to significant disruption if valuations collapse, according to the hedge fund Elliott.
The firm, which manages $70 billion in assets, criticized the US government’s apparent enthusiasm for rapidly rising assets that lack underlying value, as well as the politicians who back cryptocurrencies, which may eventually challenge the dominance of the US dollar.
Elliott expressed that it has not encountered a market environment like the current one, pointing to the fervor surrounding speculative investments, including the surge in artificial intelligence and inflated equity market valuations, likening investor behavior to that of sports gamblers.
It noted that cryptocurrencies represent a central aspect of this speculative activity, both due to their substantial growth and their perceived connection to the White House.
The firm warned that the forthcoming “collapse” of the crypto market could result in unpredictable consequences.
This critique of the administration’s crypto policies comes despite Elliott’s founder, Paul Singer, being a significant Republican donor who has contributed $56 million to conservative candidates during the current election cycle.
Despite his past warnings against cryptocurrencies, Singer previously donated $5 million to a political action committee aimed at supporting Trump.
Since Trump’s election, cryptocurrency values have soared, with Bitcoin rising from around $70,000 post-election to a peak of over $100,000.
Following his inauguration, Trump signed an executive order aimed at promoting US leadership in digital assets and directed a working group to explore the creation of a national digital asset stockpile.
Elliott highlighted the significant advantages the US dollar holds as the global reserve currency, questioning why the government would promote alternatives when other nations are attempting to reduce their reliance on the dollar.
The firm described support for efforts that could undermine the dollar as “profoundly dangerous,” emphasizing the substantial funds directed toward electing pro-crypto candidates.
An example includes the Fairshake political action committee, which has invested $173 million in the current election cycle to promote pro-crypto candidates across the political spectrum.
Trump’s business ventures have also strengthened ties with the cryptocurrency sector. Along with his sons and business associates, Trump supported a cryptocurrency platform named World Liberty Financial last year and recently launched memecoins with First Lady Melania Trump.
Trump Media, in which the president holds a majority share, announced plans to diversify beyond social media by establishing a financial services division that will invest up to $250 million in cryptocurrency and related assets.
Elliott, known for its aggressive investment strategies, engages in confrontational tactics with companies and governments alike.
The firm chose not to provide additional comments.
photo credit: www.ft.com
