The Rise of Crypto and What Donald Trump Has to Do with It

BIANNA GOLODRYGA, CNN ANCHOR: Well, as we discussed earlier, the influence of President-Elect Donald Trump is already being felt in Washington, D.C. And my next guest is sure it’s shaping another arena too, this time cryptocurrency. Charlie Warzel is a staff writer at The Atlantic who’s covered the blockchain industry for years. He tells Hari Sreenivasan how he sees the digital currency as intertwined with an antiestablishment culture.

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HARI SREENIVASAN, INTERNATIONAL CORRESPONDENT: Bianna, thanks. Charlie Warzel, thanks so much for joining us. So, this month, the price of Bitcoin cracked $100,000. And by the time we finish recording this conversation, actually, I have no idea where it will be. And by the time this conversation airs, I don’t know again. But put these numbers in context for us. I mean, this a technology, really, more than it is a currency that you and I can use.

CHARLIE WARZEL, STAFF WRITER, THE ATLANTIC: Yes. So, yes, most people have been exposed to either cryptocurrencies in general or Bitcoin through this rise that it has had since it really came into the world. It is a wild technological success story, right? Whether you are a proponent of Bitcoin or not, it has, I think, surpassed anyone’s expectations of what it could do. You know, its first real sustained boom was I think around 2017 when it really — you know, it jumped up, I think it broke — you know, I remember breaking like the $20,000 per coin, you know, mark. And a lot of people said, you know, oh, Bitcoin is going to $100,000. It’s going to a million. And those people were sort of roundly mocked for that. And it has had massive fluctuations since. You know, basically every boom has a corresponding bust in which so many people are wiped out, so much — so many like retail investors, you know, average people tend to, you know, lose their hat on that. But it has continued through all of the memes, through all of the even derision, it has continued to rise. And I think, you know, this latest boom corresponds directly to Donald Trump winning the election in November and promising sort of a prosperous future for Bitcoin in America.

SREENIVASAN: You know, one of the lines that struck me in your recent piece in The Atlantic was that fundamentally that this crypto is a technology whose transformative product is not a particular service, but a culture. Expand on that.

WARZEL: Yes. So, the knock has always been that crypto isn’t — doesn’t really have the killer use case, right? That the line that I really like about it is that it is a solution in search of a problem, right? Money already does all the things that Bitcoin wants to do. Bitcoin just purports to do it a little bit better. But it hasn’t really taken off, right? Bitcoin has not really taken off as an actual currency. You know, the countries that have tried to use it have struggled to some degree with that. So, that’s not quite the killer app. And so, I was trying to think to myself, you know, this thing has become durable. It is worth a lot of money. It has made a lot of people rich and I couldn’t really come to any other conclusion than what it has done is it has created a culture that is very kind of obsessed with speculation, right? That’s obsessed with getting rich. That really cares about the sort of gambling aspect of this the — you know, the stock marketing aspect of day trading and the numbers going up. And a real culture has come around — has been built around that. And I think that the culture starts with this idea that Bitcoin is — in some sense, is a political project, right? It is a technology that says, we are going to create a new version of a financial system that doesn’t need the banks, that doesn’t need the governments, that doesn’t need anyone else. And that culture, you can see the through lines now when you go online and you see the people who are, you know, Bitcoin maximalists, who are the true believers, the true enthusiasts, and even the day traders and the guys posting memes and things like that. There is this notion that Bitcoin can free you and the cryptocurrencies in general can free you from the man, can free you from authority, that you can make all your money this way without having, you know, other people taxing it and watching it and transferring it back and forth. And I think that that’s really important to understanding the appeal, but also what Bitcoin has produced. Bitcoin has, in a big way, produced this culture and enriched those people who are very anti-institutionalist and anti- authority.

SREENIVASAN: So, why do you think President Trump changed his mind about it? You know, he had in years prior called it a scam. And then, he really, by the summer of this year, even last year, he really embraced it. He rolled out his own essentially cryptocurrency. That, you know, again, there’s very little details about exactly what that would do. But he has projected out to these supporters who believe in cryptocurrencies that he will make the United States the Bitcoin capital and crypto capital of the world. So, when you describe a culture of people who at its core, technologically or antiestablishment, what happens when that kind of gets rolled into the fold of the establishment?

WARZEL: So, I think Donald Trump’s embrace of cryptocurrencies and Bitcoin especially is incredibly cynical. I think it is a politically calculated move. I don’t think. judging from what I have heard in my own reporting, but also what I can kind of glean in general, I don’t think that Donald Trump has a great understanding of the internal mechanics of Bitcoin. The idea that it is a sophisticated database technology that is distributed — all that stuff, right? I don’t think he’s paying strict attention to that or that he really cares that much about it. And I think the real reason is that cryptocurrencies and the people who like them are people who really do resist these institutional ideas. People who really feel that they’re the same type of people who would want to drain the swamp, right? They’re the same type of people who would cheer on Elon Musk and that idea of the Department of Government Efficiency. There is an ideological overlap to some degree, not fully, but to some degree with the MAGA platform, with this idea that banks are screwing you over or Wall Street is screwing you over, and to sort of take control in this own way and work in a financial system that doesn’t include those people. I think he saw a huge constituency overlap there with crypto and decided, you know, there are some people, especially people who’ve made their fortunes in this, who are single issue crypto voters. And in an election that is very close, you know, in an election where, you know, we’re trying to win disaffected men, especially, I think he saw an opportunity there to speak to those people, to become the candidate for those people. And by virtue of that, I think he saw it as just a really good political play.

SREENIVASAN: The industry as a whole became an incredibly powerful force when it came to campaign contributions somewhere around, I want to say like, $200 million went to support pro-crypto candidates. So, how does that influence play out in the — this coming administration?

WARZEL: It was really staggering to me as somebody who covers the technology industry pretty closely to take a bird’s eye view and survey the political donation landscape and see crypto’s impact in it. They — as a lobbying constituency, they put the most money in of any, you know, advocacy group in the 2024 election. They backed a number of races and we’re incredibly successful. So, we’re talking, you know, raising hundreds of millions of dollars, throwing that into the financial system in a really targeted way, right? They say that this was not partisan. They backed Democratic candidates. They backed Republican candidates. The only issue was you had to be pro-crypto. And I think in certain races too, especially some smaller races, people were not prepared for the influx of money that their opponents were getting. And so, the crypto constituency was really powerful. It was a concerted effort by the industry in 2024, especially to show their force, even more than getting the candidates, you know, elected to office, that was a goal for sure. But another was just a show of force, to say, we are a constituency that matters. Yes, you might not think walking around through the world that people who love cryptocurrencies and who, you know, want to see cryptocurrencies thrive that they’re a meaningful political constituency, but they put the money behind it to show that they are. You have a bunch of people who have made a lot of money over the past decade, you know, in some cases, billions of dollars off of Bitcoin and off of their cryptocurrency holdings. Again, they’re not a meaningful constituency without that money, right? They’re just people who believe in this — you know, this type of financial system. But because they have some of this money, they threw it into the financial system. They got the guy elected who promised to do something — you know, promised to make a prosperous future for Bitcoin. As a result, the price goes way up. I mean, I believe a year ago at this time, Bitcoin was hovering around $45,000, $46,000 per coin. It’s now well over $100,000 per coin. So, the investment for those people has doubled since they put this political donation strategy into play. So, those people now have even more money and even more influence and even more people trying to court them. I think what we’re seeing here is this money influence flywheel that normally is actually really hard to see. So, I think we’re seeing influence that’s really naked and we’re seeing the ways in which these people spun money out of nothing, use it to create power, and the power is now making them more money. And it’s a really interesting process to watch play out.

SREENIVASAN: The president-elect has said that he wants to have a national bitcoin reserve. And what are the consequences? Well, first of all, how would that even work? But second, if you do understand that, but doesn’t that kind of integrate bitcoins volatility into the larger economy, right? I mean, last time there was a Bitcoin bust, we saw a couple of banks, well, Silicon Valley Bank comes to mind right now, are ones that had significant exposure to this that ended up collapsing. So, what happens when Bitcoin becomes something that the government actually holds?

WARZEL: So, this to me, in my reporting, was the most eye opening and alarming thing piece of the crypto integration. This Bitcoin strategic reserve, essentially, as I seem to understand some of the possible plans is that the United States will purchase Bitcoin from large holders, right, or everyday Americans, but the people who stand to benefit from that are people who own a lot of Bitcoin, right? So, it’s purchasing 200,000 Bitcoins a year for five years is what I believe it is. But regardless, the purchase of this Bitcoin from large Bitcoin holders will drive the price of Bitcoin up. So, every subsequent year that the government is purchasing this bitcoin, it’s going to do so at a higher rate. It’s going to have to spend more and more money to create the strategic reserve. To do so, it’s going to have to sell off some of its gold reserves. And a way to think about this essentially as a cash transfer from the United States government to the people who already hold the most amount of bitcoin that will also inflate the price of Bitcoin because it has this massive sort of, you know, unquenchable buyer in the United States Treasury. It’s a terrible deal for the United States government because it’s getting a worse price every year. It speaks to me as a great example of the way that these people who have invested early in this technology are going to try to bully institutions and the global financial system. And that’s saying nothing of the fact that bitcoin is an extremely volatile currency, right? You don’t want this speculative asset that can lose half its value in six months or a year as, you know, backing your monetary system. It’s dangerous. And this speaks to the most important point I heard when I talked to a bunch of crypto skeptics and people inside the financial industry, which is that their biggest fear isn’t that a lot of people will adopt Bitcoin or, you know, choose a technologically based financial system. The biggest fear is that crypto will intertwine and mesh with the global financial system in a way without adopting any of the guardrails that it will need to do. And then, there will be this contagion between the crypto ecosystem and the traditional financial system. When FTX collapsed, a lot of people lost, you know, their life savings. It was a huge, you know, financial catastrophe. It was very well covered. A lot of people saw it, but the global financial system was not affected by this. If we plug crypto into that, these people have told me what they’re most worried about is that, you know, malfeasance or fraud or whatever that’s happening in this much less regulated sector could come in and hurt people who are not doing that kind of speculating, who are trying to invest in sound assets and stable assets.

SREENIVASAN: And I wonder with the intentional choices that the president- elect has made so far, he said he wants Paul Atkins to run the SEC and he has pointed or is interested in appointing David Sachs, a Silicon Valley venture capitalist, to be sort of the crypto and A.I. czar. What does that signal and does that give the kind of financial industry some greater concern?

WARZEL: I think what we’re seeing from Donald Trump’s, you know, early appointments and from, you know, his posturing on this is that he’s going to continue to pander to this constituency. So, I can only imagine that unless the industry does something to, you know, turn him off or, you know, attract his ire, I think he’s only going to try to, you know, enmesh crypto with the global financial system. There is a fear inside of a lot of banks that I’ve heard from numerous sources that they don’t want to be left behind, right? They don’t want this one asset class to be, you know, the historic 21st century growth asset that they do not get behind. They also do not want to be seen as dinosaurs, you know, in terms of their institution. You have a lot of younger people who see crypto as new, exciting part of the future. Those people are only going to, you know, make more money, invest more heavily in banks and things like that, and want to see an asset class that they believe is important. And so, there’s this idea of like fear of missing out, right, that these banks might want to do this. And if the Trump administration comes in and, you know, props up crypto and, you know, offers no real important regulations and allows people to trade it as a security, I think what we’re going to see is that co- mingling, because I think banks don’t want to be left out of, you know, the money.

SREENIVASAN: Charlie Warzel of The Atlantic, thanks so much for joining us.

WARZEL: Thanks for having me.