Bitcoin Price Bubble Fears Rise as Elliott Management Warns of 'Financial Crisis'

The bitcoin price has surged to over $100,000, more than doubling from 12 months ago and fueling huge bets on when exactly the bitcoin price could top gold's $18 trillion market capitalization.

A leaked letter from Elliott Management to investors has warned that hedge fund managers fear Donald Trump is stoking an unprecedented bitcoin price bubble that is headed for "inevitable collapse."

The warning comes as bitcoin and crypto prices have rocketed higher, fueled in part by Trump's campaign promises to make overhauling crypto policy a priority.

Trump has described himself as the first "crypto president"—pushing the bitcoin price sharply higher.

After ordering the creation of a cryptocurrency working group tasked with proposing new regulations, Trump's crypto and artificial intelligence czar, venture capitalist David Sacks, will chair the group.

Sacks—an early investor in the ethereum rival solana—told Fox Business that Trump's actions showed he is following through on his promise to make the U.S. the "crypto capital" of the world, something Trump also told World Economic Forum attendees in Davos.

In July, then Republican candidate Donald Trump promised to create a "strategic national bitcoin reserve" and predicted bitcoin could eclipse gold's $16 trillion market capitalization during an appearance at the Bitcoin 2024 conference.

On the weekend before his inauguration, Trump launched a memecoin, followed closely by his wife Melania launching one of her own, both of which surged to multi-billion dollar valuations before crashing back.

According to the letter, seen by the Financial Times, the hedge fund's managers have "never seen a market like this," referring to the speculative investor frenzy gripping financial markets.

The letter adds that the artificial intelligence boom and high equity market valuations are signs of investors “acting like a crowd of sports bettors.”

The letter also warned U.S. officials that support "marginalizing the dollar" are "profoundly dangerous" and could rob the U.S. of its "immense advantage" derived from the dollar’s position as the world’s reserve currency.

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The bitcoin price has shot to an all-time high of almost $110,000 per bitcoin in the aftermath of ... [+] Donald Trump's election victory.

Muddying the waters, the FT pointed to Elliott founder Paul Singer’s support for the Republican Party and his donation of $56 million to conservative candidates in the 2024 election cycle, including a $5 million gift to the "Make America Great Again" Trump-supporting political action committee.

In an interview with Grant Williams earlier this month, Singer pointed to the explosive growth in crypto assets as a prime example of irrational investor activity.

“People try to be rational and think that they’re rational, but quite frequently they’re not,” Singer said. “And there is hardly a better example today than cryptocurrencies.”

In 2023, Singer told the Wall Street Journal that bitcoin and cryptocurrencies are "completely lacking in any value”—with the bitcoin price at under $30,000 at the time.

"There are thousands of cryptocurrencies," Singer told the Journal. “That’s why they’re worth zero. Anybody can make one. All they are is nothing with a marketing pitch—literally nothing.”