Hours before President Trump’s Truth Social post hyping a national strategic crypto reserve last Sunday, an anonymous trader leveraged $4 million to open 50x long positions in Ethereum (ETH) and Bitcoin (BTC), the combined positions valued at $200 million. The timing of this tremendously risky bet aligned perfectly with Trump’s announcement and the trader cashed out for $6.8 million. Some now question if this was insider trading.
Uncanny Timing, Unbelievable Leverage
Disruption Banking saw the coming of the national strategic crypto reserve in the distance, and we wrote about it here, but we didn’t predict there would be insider trading. The trade, performed on the decentralized derivatives platform Hyperliquid, left only a razor-thin margin for error and was so highly leveraged that a decline of around 2% would have liquidated the entire position. Given the famously volatile nature of the crypto market, a 2% fluctuation is common.
Indeed, at 9:37 AM, the anonymous trader’s Ethereum position had fallen to within $54 of the entire position being liquidated. Then, Trump made the first of two announcements at 10:24 AM.
Strangely, Trump didn’t mention Bitcoin and Ethereum in his post, but instead he highlighted XRP, SOL and ADA. Nevertheless, the whole crypto market immediately surged. Catching the spike, the anonymous trader closed his or her position for $6.8 million.
Later that morning, Trump clarified with a second post that “obviously” Bitcoin and Ethereum would be at the heart of a reserve. In response, the prices leapt even higher.
The crypto market gained $230 billion in 24 hours, or roughly 8% of the total market value. Bitcoin rose 10% and Ethereum rose 15%. Then, prices fell back to earth.
Whale Watching
The leveraged position’s noticeably large size caught the attention of blockchain researchers almost immediately. Prior to allegations of insider trading, one observer guessed the position was either due to reckless rich guy spending or a crypto whale about to make a major move in the spot market.
Certainly, the position could have been opened by a whale as some sort of hedge, or, it could have been a rich degenerate, as Teddy Bitcoins suggests. However, the timing and the nature of the trade are hard to ignore. Dozens, if not hundreds of White House insiders could have known of the imminent announcement and sought to profit off of it.
Among others, crypto investor Mike Alfred directly accused Trump and his inner circle of malfeasance, writing in a now-deleted X post:
“Now we know who made this insanely well timed $4M, 50x leverage bet on BTC and ETH. Well played @realDonaldTrump and @DonaldJTrumpJr. This is exactly how to turn power and influence into money. The Bidens played small ball in comparison. Bravo.”
Senator Adam Schiff is calling for an investigation, which is unsurprising. However, Peter Schiff, the chief economist at Euro Pacific Capital who previously endorsed Trump, has also called for an investigation, accusing Trump of a “pump and dump scheme.”
Schiff specified, “We also need all emails or text messages that involve any members of the President’s staff, his or their family or friends, his campaign donors, or Truth Social employees, that relate to either of the two Sunday Truth Social posts.”
It would be very easy to discover who orchestrated the leveraged bet, but it’s unlikely that the heads of Congressional committees have the appetite to challenge the emboldened President.
Winners and Losers
The New Republic posted a rather cavalier article pointing at Trump’s crypto czar, David Sacks, as a major beneficiary of the strategic crypto reserve. Specifically, the outlet indicated that the cryptocurrencies listed as part of the intended reserve, Bitcoin, Ethereum, XRP, Cardano, and Solana, were the same assets held by one of Sacks’ former companies.
Sacks responded publicly promising that he had divested all his direct holdings.
Online sleuths noted that he may still indirectly hold enormous amounts of those assets, a claim which Sacks disputed. Interestingly, in 2021, Sacks panned the idea that the government should choose winners and losers by allocating taxpayer money into investments.
New replies have exploded beneath this tweet, criticizing Trump’s plan.
Henry Elder, head of BTCFi for UTXO Management, a bitcoin fund, explained that “While Trump’s recent EO establishing a National Strategic Crypto Reserve was warmly welcomed by the industry, they recognize that Congressional action is necessary to protect the reserve from less crypto-friendly administrations in the future.”
It’s surprising this has not been suggested by more Congressional Republicans, and it might be a sign of their decreasing influence beside the rising “unitary” executive branch.
The Best of Times or the Worst of Times?
In the short-term, the U.S. government will compile its existing Bitcoin and explore methods of acquiring more without adding to the budget or imposing costs on taxpayers, according to Trump’s EO. That would make it subject to the agreement of the U.S. Congress.
The New York Post wrote, “It would be next to impossible to get even GOP lawmakers to approve using general revenues or selling trillions in debt to fund this thing.
In the long-term, it’s clear that Trump has planted himself square in the middle of the industry. The Trump family members will receive the crypto faithful while the President promotes new altcoins with his megaphone and builds up stockpiles of digital assets, with or without the approval of Congress.
Author: Laird Dilorenzo
#Crypto #Trading #DigitalAssets #WhiteHouse
Laird Dilorenzo is a hatchet thrower and wordsmith.
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
Trump’s Big Bet on Crypto | Disruption Banking
David Sacks Press Briefing | Disruption Banking
Has the Crypto Renaissance Really Begun? | Disruption Banking
