Trump Media To Invest $2.5 Billion in Bitcoin - Is POTUS Hedging Against the Future of the US Dollar?
A slight conflict of interest, perhaps?
Trump Media & Technology Group recently announced a $2.5 billion investment to establish a Bitcoin treasury, a move which would make it one of the largest corporate Bitcoin reserves.
While those in the crypto ecosystem may applaud the move as further vindication of the intrinsic value of Bitcoin, and credit it as one of the many reasons for recent all-time highs in its price, the move represents something of a paradox; that the so-called Leader of the Free World feels it necessary to hedge against the future of the U.S. Dollar for some of his wealth.
This move mirrors the strategy pioneered by Michael Saylor at the firm Strategy (formerly MicroStrategy), where Bitcoin is used as a treasury asset to hedge against inflation and financial instability. The move led by Saylor has played at least a small part in elevating Strategy into the S&P 500, earlier this year.
For Trump, and Trump Media (whose only notable product is the social media platform — Truth Social), the acquisition of Bitcoin onto its balance sheet is likely to finally give the platform some intrinsic value besides being an echo-chamber for Trump and his MAGA followers.
Key Details of Trump Media’s Bitcoin Investment
Trump Media aren’t the first business to follow the lead of Saylor and Strategy in putting Bitcoin on their balance sheet, but they’re the first whose defacto head should be the world’s biggest advocate for the stability of the U.S. dollar.
Regardless of this slight tension, Trump Media appear to have recognised that it makes sense to hold Bitcoin as a hedge against dollar-hegemony, and even a worthy investment to acquire with money raised, not just cash already held. The proposed structure of the acquisition is as follows:
The company secured $1.5 billion through stock sales and $1 billion via convertible senior notes.
The stated purpose of the deal is to defend the organisation (and presumably its namesake and number 1 user) against financial institution discrimination as well as to integrate Bitcoin into its business model, including subscription payments and a utility token.
The Bitcoin treasury will be managed by Crypto.com and Anchorage Digital, ensuring secure storage.
The market reaction on announcement of the deal was mixed. Trump Media’s stock fell over 9% following the announcement, while Bitcoin saw a slight uptick, hovering around $110,000.
Worth contemplating aside from the effects above, is the fate of those left holding stock in Trump Media in the short term, assuming that the eventual inclusion of Bitcoin on its balance sheet mirrors effects seen for Strategy. The drop in value of DJT stock (the stock ticker for Trump Media and Technology, in case you were in any doubt over the link between POTUS and the business), will effect those who continue to hold stock in the business — likely including many of his most-ardent supporters who were believed to have cashed-in their savings to provide financial support for their ‘Dear Leader’.
While they might reasonably hope that holding Bitcoin would boost the value of DJT, nonetheless the immediate effects were alarming.
Comparison to Michael Saylor — valid?
Saylor’s firm has aggressively acquired Bitcoin using debt financing and stock sales, positioning it as a core treasury asset. The move has long been championed by Saylor as core to its operations and financial stability, but the tide has shifted to suggest that others are considering following his lead. Beleaguered GameStop recently sought to do the same, with less success. Microsoft too, put a proposal to shareholders to build a Bitcoin holding. This was rejected (for now).
Meanwhile Trump Media is following a similar path, its investment is tied to broader America First economic principles, aiming to expand its influence in financial services. For Trump himself, the inevitable side-effect that usually appears to be baked-into most policies and statements — a degree of personal enrichment.
This has long-since ceased to be of shock or surprise to those who follow US politics.
Political & Economic Implications
Despite previously criticizing cryptocurrencies, Trump has embraced Bitcoin, even proposing a national strategic Bitcoin reserve. His recent personal forays into crypto, including the controversial launch of his own $TRUMP meme coin on the eve of his inauguration have confirmed that he sees the opportunity for financial gain from it, even if he’s been personally skeptical in the past.
This move could significantly impact Bitcoin’s adoption and price trends, especially as Trump Media integrates crypto into its broader business strategy.
Meanwhile, questions remain (even from crypto fans like me) over whether its appropriate or credible for the President of the United States to seek to hedge against the future deflation in value of the U.S. Dollar, or its potential replacement as global reserve currency.
Time will tell if there is a backlash against his latest scheme.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.