Some old-school City of London speculators are urging caution about the current crypto craze sweeping the U.S. and other financial markets. Larry Fink of BlackRock has gone on the record thoroughly backing crypto as the wave of the future, but on Jan. 30 City of London daily Financial Times published a prominent report on a memo that was just issued by Paul Singer’s Elliott hedge fund, one of the most prominent and aggressive funds in the world of financial predators, which warns that the White House is inflating the crypto bubble and that “could wreak havoc.” The Elliott memo says that crypto prices have soared, but they have “no substance,” and that it is foolish to promote something that could eventually become a rival to the dollar. The world “has never seen a market like this,” wrote Elliott; investors are “acting like a crowd of sports bettors.” “Crypto is ground zero” for the “inevitable collapse” of the crypto bubble, which could “could wreak havoc in ways we cannot yet anticipate.”
The Financial Times article noted the irony that the founder of Elliott, Paul Singer, is a longtime Republican donor who ponied up $56 million to conservative candidates in the 2024 election cycle, and $5 million this cycle to the “Make America Great Again” political action committee which supported Trump. The article added: “Trump Media, in which the President owns a majority stake, said on Wednesday [Jan. 29] it would expand beyond social media and launch a financial services business that would invest up to $250 million into cryptocurrency and other assets.”
On Jan. 26, London’s The Economist issued a similar warning about crypto, in an article headlined “Will America’s Crypto Frenzy End in Disaster?”. They noted that President Trump’s “executive order on January 23rd made things clear: digital assets, it announced, would play `a crucial role in innovation and economic development in the United States, as well as our Nation’s international leadership.’” This poses a huge danger. “What does this spectacular merger of hype cycle and national governance mean for American finance?” The Economist asks, adding: “Expect, as a consequence, new and enormously profitable forms of risk-taking to emerge…. The cryptofication of mainstream finance is already under way.… A few crypto firms could even attempt to purchase institutions with banking licences, allowing them to take deposits and offer loans. The result would be much more overlap between the crypto industry and traditional finance.”
This poses a major problem. “If bank deposits are vulnerable to movements in the crypto market, institutions will become more vulnerable to runs.”
