‘Profoundly Dangerous’: 1 Way to Bet Against the Crypto Bubble After Hedge Fund’s Trump Warning

President Trump has billed himself as a “crypto president,” and longtime supporters of Bitcoin (BTCUSD) cheered his election as a major step toward gaining legitimacy for the digital asset. The establishment of the U.S. Cryptocurrency Advisory Board marks a significant step in formalizing the country's approach to digital finance, with venture capitalist David Sacks tapped as the first-ever “crypto czar.” 

The president’s passion for decentralized finance also led to the launch of Trump Coin on the Solana (SOLUSD) blockchain, a meme-based cryptocurrency that soared in value ahead of the inauguration - but has since experienced significant volatility. That has raised the concerns of some on Wall Street, with The Financial Times reporting on a new warning from hedge fund Elliott.

Asserting that propping up alternative currencies at the expense of “marginalizing the dollar” is “profoundly dangerous,” Elliott called out the Trump administration for boosting “assets that have soared in price but have no substance.” At the same time, Elliott said investors are behaving “like a crowd of sports bettors."

Overall, the hedge fund warned in its investor letter, they fear that the potential cryptocurrency bubble’s collapse “could wreak havoc in ways we cannot yet anticipate.”

For investors who agree with Elliott’s view - and who are bold enough to consider a leveraged bet against a legitimate crypto stock juggernaut - there’s the Defiance Daily Target 2X Short MSTR ETF (SMST). The fund targets daily leveraged investment results that are double the inverse (-200%) of the daily percentage change in the share price of MicroStrategy Incorporated (MSTR) - the enterprise software specialist that successfully rebranded as a Bitcoin holding enterprise.

Based on this strategy, SMST has performed terribly, down 83% over the past three months while Bitcoin prices have surged. However, investors with a tight time horizon can capture quick moves with SMST on down days for the cryptocurrency, when the double-leveraged MicroStrategy bear fund tends to outperform with double-digit daily percentage gains.