Elliott Management, the activist investment firm led by Paul Singer, has raised concerns regarding the cryptocurrency market, suggesting that it may be on the brink of an “inevitable collapse.”

In a recent investor letter reported by Fortune, the firm attributed the inflation of this so-called “crypto bubble” to the perceived endorsement from the White House, particularly during President Donald Trump’s administration.

Impending Crypto Collapse Ahead?

The letter articulated fears that the US government’s backing of cryptocurrencies could undermine the dollar’s position as the world’s primary reserve currency.

Elliott Management highlighted that the dramatic rise in crypto prices, allegedly tied with Trump’s promotion of digital assets, poses risks not only to individual investors but also to the broader economy.

The firm warned that the impending collapse of the alleged crypto bubble could have unforeseen repercussions, potentially destabilizing financial markets.

Elliott’s letter pointed to what they call “speculative nature” of the current crypto market, where a surge of investment appears to be driven more by hype than by intrinsic value. The firm noted it had “never seen a market like this,” where investors are drawn to assets, particularly memecoins, that lack substantial backing.

They assert that this “speculative fervor,” likened to the behavior of sports bettors, has attracted a wave of new investors hoping for continued price increases without a solid foundation.

Concerns Mount Over US Dollar’s Future

Elliott expressed particular concern about Trump’s vocal support during his campaign and his involvement in several crypto-related ventures have contributed to a perception of legitimacy surrounding the sector.

Trump and his sons have been increasingly leaped into the digital asset sector with ventures such as World Liberty Financial (WLFI), American Bitcoin (ABTC) and the launch of the President’s official memecoin, TRUMP, which have sparked considerable criticism among Democrats.

Elliott cautioned that such endorsements could marginalize the dollar, which the firm described as “profoundly dangerous.” The establishment of a national reserve for digital assets, as proposed by the Trump administration, further complicates this scenario, potentially diluting the dollar’s influence in the global economy.

The letter also stressed the need for caution among investors, warning that many are placing their bets on a volatile market based on “speculative trends rather than sound financial principles.”

Despite the firm’s stark warning, cryptocurrency prices rebounded on Wednesday. The leading cryptocurrency, Bitcoin (BTC), was trading at $113,450 when writing, after consolidating for days between $110,000 and $112,000.

Furthermore, the recent passage of the GENIUS Act—the first crypto bill signed by President Trump—is expected to enhance the use of the US dollar as a complement to stablecoins, thereby updating the broader financial system.

Wall Street giants Morgan Stanley, Citi, Bank of America, and JPMorgan Chase have all also expressed their willingness to enter the sector. This highlights the administration’s progress in developing a new framework that could mitigate risks while accelerating the adoption of digital assets.