Crypto Empire
Up nearly 50% in a single month[1]! Bitcoin is celebrating Trump’s victory, one of its most prominent advocates. With the zeal of the recently converted, Trump has thrown his weight behind the cryptocurrency, enriching its community of devotees, starting with Elon Musk – an act of gratitude for Musk’s unwavering support.
But Trump is doing much more than enriching Bitcoin enthusiasts. By becoming president, he lends the cryptocurrency an image of legitimacy, reinforced by an administration wholly dedicated to this mission. Beyond Elon Musk’s central role in the incoming administration (Musk was a major Bitcoin buyer through Tesla in 2021, although some of his holdings were sold off in 2022), the proposed appointment of Paul Atkins as head of the Securities and Exchange Commission (SEC) further cements Bitcoin’s status. Atkins, a high-profile advocate for cryptocurrency, previously served in the same role under George W. Bush from 2002 to 2008. The SEC, long hesitant about Bitcoin, has undergone a shift. Previously cautious, it delayed approving Bitcoin-backed ETFs until January 2024. The planned appointment of David O. Sacks, a PayPal alumnus like Musk and a prominent Silicon Valley figure, as “White House AI and Crypto Czar” (yes, really) bolsters the pro-crypto line-up set to take Washington by storm. This is a stark contrast to the Democratic Party, where scepticism towards cryptocurrency borders on unanimous.
This steady elevation of Bitcoin to quasi-legitimate currency status is set to upend the global monetary order. Major central banks are already beginning to take a less cautious approach. At a recent summit hosted by the New York Times, Jerome Powell, Chairman of the US Federal Reserve, said: “It’s just like gold, only it’s virtual, it’s digital.” This equivalence to gold, acknowledged by the world’s top central banker, marks a significant milestone. Even more striking, Powell defused concerns about competition between the two: “It’s not a competitor for the dollar, it’s really a competitor for gold”, he added.
As Bitcoin makes inroads into major institutions, it is undergoing a paradoxical transformation. Initially conceived as a currency free from national institutions and central banks, which were vilified by its distant libertarian inspiration Friedrich Hayek, Bitcoin is gradually becoming an asset intrinsically tied to major American institutions, themselves heavily regulated. Major American stock exchanges like the Chicago Mercantile Exchange and the Chicago Board Options Exchange were early adopters, launching Bitcoin derivatives as early as 2017, which are now widely used. Leading global asset managers – US unsurprisingly – such as BlackRock and Fidelity, launched Bitcoin-backed funds as soon as the SEC granted approval. Together, these two funds already manage over $70 billion in assets after less than a year since their creation.
Now deeply embedded in the US financial system, has Bitcoin – and by implication, cryptocurrencies more broadly – become an extension of the dollar rather than its replacement? One thing is clear: by institutionalising Bitcoin, the US has positioned itself to steer its trajectory, leveraging it for its own interests when necessary. And Europe, as always, is lagging behind, risking yet another capitulation to American dominance. Europe’s first Bitcoin futures contracts only emerged in 2021, and mainstream funds strictly tied to Bitcoin remain non-existent – those few that do exist are regarded as alternative investments. European institutions largely view cryptocurrencies as a threat rather than an opportunity, as evidenced by a recent article by two European Central Bank officials (admittedly not reflecting the ECB’s official stance)[2], which dismissed Bitcoin as a speculative bubble requiring public protection.
Like Trump’s new administration, does the legitimisation of Bitcoin herald a new global catastrophe or a freer financial world? At the very least, it signals the arrival of a more “Trumpian,” more American world, where non-state currencies reflect the perpetual competition between states themselves.
The opinions cited are those of the fund manager. LFDE shall not be held liable for these opinions.
Final version of 6 December 2024 – Alexis Bienvenu, Fund Manager, LFDE
[1]At 6 December 2024
[2]ETF approval for bitcoin – the naked emperor’s new clothes