Elliott Management, a well-known hedge fund described by Fortune magazine as "the world's most famous and feared activist investor," has warned that the White House is "inflating a cryptocurrency bubble" that could lead to "severe damage."

According to an investor letter recently obtained by the Financial Times, Elliott Management criticized the Trump administration's support for cryptocurrencies, arguing that it is fueling speculative fervor. The fund warned that a sharp drop in cryptocurrency prices could result in "severe damage."

The $700 billion asset manager publicly condemned the US government, criticizing its blind enthusiasm for assets with "soaring prices but no fundamental support" and also taking issue with politicians who support cryptocurrencies that could undermine the US dollar's dominant position.

Cryptocurrency: The "Core of the Bubble" and Its Link to the White House

Elliott Management wrote that the fund "has never seen such a market," asserting that speculative investors' frenzy is sweeping through financial markets. It pointed out that the boom in artificial intelligence and the high valuations in the stock market are signs of "investor behavior akin to gamblers betting on sports events."

The report further stated that "cryptocurrencies are the epicenter of the speculative frenzy," not only because of their continuing market value expansion but also due to their "perceived closeness to the White House." The report claimed that the cryptocurrency bubble is "inevitably going to burst" and "could cause severe damage in ways we cannot anticipate."

Irony of the Criticism

The criticism is somewhat ironic, given that Elliott's founder, Paul Singer, a long-time Republican donor, has contributed $56 million to conservative candidates during the 2024 election cycle (source: OpenSecrets) and donated $5 million to the "Make America Great Again" political action committee supporting Trump's re-election in 2024.

Since Trump's election in November last year, the crypto market has soared, with his promise to make the US "the Bitcoin superpower of the world." The price of Bitcoin has surged from around $70,000 before the election to a historic high of over $100,000.

As previously reported by BitPush, Trump signed an executive order after taking office to promote the US "leadership in digital assets and financial technology while protecting economic freedom" and tasked a working group with assessing the establishment of a national digital asset reserve.

Policy Paradox: Undermining the Dollar's Dominance?

The Elliott letter sharply pointed out that while many countries around the world are trying to reduce their dependence on the US dollar, the US government is encouraging the development of alternatives that could threaten the dollar's reserve currency status, calling this "policy contradiction baffling."

Elliott emphasized that any official support for "marginalizing the dollar" is "extremely dangerous" and revealed the reality of "hundreds of millions of dollars flowing to pro-crypto policy candidates" in past election cycles.

For example, the Fairshake political action committee, which aims to promote the election of crypto-friendly candidates across party lines, spent $173 million during the 2023 - 2024 election cycle (source: OpenSecrets).

This entanglement of capital and policy is particularly evident in Trump's business empire: last year, his family supported the crypto platform "World Liberty Financial," and this month, he and his wife Melania each issued Meme coins without any actual business model. Trump Media announced on Wednesday that it will invest $250 million in the crypto asset space.

Founded in 1977, Elliott is known for its activist investment style, having forced several public companies and sovereign states to concede through shareholder lawsuits and boardroom battles. Its classic "achievements" include pressuring Starbucks to change its CEO and launching a "proxy fight" at Southwest Airlines, which led to the retirement of the airline's chairman, Gary Kelly, and Elliott's acquisition of five board seats. According to Forbes, as of March 2024, Elliott's founder, Paul Singer, had an estimated net worth of $6.1 billion.

Elliott Management's stern warning about the cryptocurrency market not only reveals its keen sense of market risk as an "activist investor" but also highlights the deep contradictions in the global financial system amid the digital wave. On one hand, the rise of cryptocurrencies is seen as a potential challenge to the US dollar's dominance; on the other hand, the ambiguous attitude of the US government and politicians injects significant policy uncertainty into this market.

Elliott's criticism stands in stark contrast to the Republican background of its founder, Paul Singer, and this contradiction precisely reflects the complex role of cryptocurrencies in the game of politics and capital. Whether it is Trump's business layout or the massive lobbying by the Fairshake political action committee, it shows that cryptocurrencies are no longer just a product of technological innovation but have become a new battleground intertwined with power and interests.