Activist investor Elliott Management says crypto is facing an ’inevitable collapse’ after its ‘perceived proximity to the White House’ inflated a bubble

Famed activist investor Elliott Management sent investors a letter warning of a possible crypto bubble fueled in part by President Donald Trump’s having promoted the technology.

The letter, which was first reported by the Financial Times, cautioned investors that the “inevitable collapse” of the crypto bubble “could wreak havoc in ways we cannot yet anticipate.” Elliott also warned that the White House’s embrace of cryptocurrency would weaken the role of the U.S. dollar in the global economy by diminishing its role as the world’s primary reserve currency.

The size of the crypto bubble and therefore the risks it posed to investors and the economy had increased sharply recently because of its “perceived proximity to the White House,” Elliott said in the letter.

Elliott declined to comment. The White House did not immediately respond to a request for comment.

During the campaign, Trump regularly declared his support for cryptocurrencies and his desire to see the U.S. become the dominant country in the industry. The president has also been involved in several crypto ventures including crypto platform World Liberty Financial and launching a memecoin of his own. In addition, his media company announced plans earlier this week to develop a fintech service that would allow for the trading of digital assets, among other things.

Since Trump’s election win in November, crypto prices have soared along with stocks associated with the industry as well as U.S. markets overall. Just a few days after taking office, Trump signed an executive order that began the process for creating a national reserve of digital assets.

Elliott said it had “never seen a market like this” with so many investors pumping money into the market based purely on speculative hype. Elliott also warned against a surge in prices for speculative assets it believed had “no substance.” That category of asset, which includes memecoins, has no underlying value and is instead only fueled by investors’ hope that they’ll be able to find someone else who will pay a higher price for it than they did.

“Crypto is ground zero” for these speculative assets, Elliott wrote in the letter.

In Elliott’s view, this had driven flocks of investors toward crypto. But many of them were merely hoping that the market would continue to go up. They are “acting like a crowd of sports bettors,” the letter read.

Story Continues