Hedge fund giant Elliott Management has sounded the alarm on what it describes as a speculative frenzy in cryptocurrencies, blaming the Trump administration’s support for digital assets as a key driver of the bubble, according to a report the Financial Times.

In a letter to investors, the $70bn firm warned that the US government’s embrace of crypto is helping inflate an unsustainable market that could lead to catastrophic consequences when it inevitably collapses. Elliott, known for its aggressive activist investing, described cryptocurrencies as having “no substance” and criticised politicians for backing the sector.

In the letter, Elliott compared the current investment climate to a sports betting frenzy, pointing to surging equity valuations and the AI boom as signs of reckless risk-taking. However, it singled out cryptocurrencies as the most extreme example of speculation, fuelled in part by their “perceived proximity to the White House.”

“Crypto is ground zero for speculative excess,” the firm wrote. “Its inevitable collapse could wreak havoc in ways we cannot yet anticipate.”

Bitcoin’s price has skyrocketed since Trump’s November election victory, surging from $70,000 to over $100,000, following his promise to make the US the “bitcoin superpower of the world.” After his inauguration, Trump signed an executive order promoting US leadership in digital assets and launched a working group to explore a national digital asset stockpile.

Elliott’s sharp criticism comes despite its founder Paul Singer being a major Republican donor, contributing $56m in the 2024 election cycle, according to OpenSecrets. Although Singer has previously criticised Trump’s economic policies, he donated $5m to a pro-Trump political action committee (PAC) last year.

The firm questioned why the US government would support crypto adoption at a time when other nations are seeking to reduce dependence on the US dollar. It warned that efforts to marginalise the dollar were “profoundly dangerous”, citing millions spent on lobbying and political donations from crypto-backed groups.

The Fairshake PAC, which supports pro-crypto candidates, spent $173m in the 2023-2024 election cycle, according to OpenSecrets.

Trump’s personal and business ties to crypto have deepened in recent months. In 2024, he and his longtime business partners backed a crypto platform called World Liberty Financial. Earlier this month, both Trump and First Lady Melania Trump launched memecoins, a highly speculative form of digital currency.

On Wednesday, Trump Media, in which Trump holds a majority stake, announced plans to invest up to $250m in cryptocurrencies and digital assets as part of an expansion beyond social media.