Published in Svenska Dagbladet, 2024-12-06. Translated from Swedish.
The tech elite’s bet on Trump has already started to pay off. With the appointment of David Sacks as “AI and crypto tsar,” the venture capitalists have billions of reasons to celebrate.
The Silicon Valley elite gathered for a dinner at venture capitalist David Sacks’ home in June. The guest of honour was Donald Trump, then a presidential candidate. Tickets cost over three million kronor each — which may sound steep, but getting the ear of an incoming president can be worth considerably more than that. Venture capitalists around San Francisco are used to staking millions in the hope of a large return later.
That return arrived in the early hours of Friday morning. David Sacks was appointed by Donald Trump as “AI and crypto tsar.” It is largely a symbolic role — but the message it sends is clear: tech is back in the political inner sanctum. The tech companies’ new enthusiasm for Donald Trump is mostly about what he will not do. Trump has indicated he will not introduce tough regulation of cryptocurrencies and that he will not block as many corporate acquisitions on competition grounds. The “crypto tsar” Sacks will, according to Trump, work on a “legal framework” for the crypto industry to create more clarity. Clear guidelines are something most people — both critics and enthusiasts — would welcome. But the real value here is the legitimisation of the sector.
The market has already spoken clearly on this. Since election day in the United States, the crypto market as a whole has risen by over 65 percent. The equivalent of market capitalisation has increased by over 15,000 billion kronor in roughly one month. Bitcoin has set new price records. After a couple of years in the penalty box following enormous crashes at companies like FTX, there is now a strong tailwind for the first time in a long while.
Cryptocurrencies have often been presented as a kind of alternative to the existing economic system — an economy without a central bank, politically close to libertarianism. Philosophically it is a reasonable match. Transactions can occur without intermediaries, and flows of capital can happen without the possibility of political interference. Reality, as so often, looks a little different. Enthusiasts tend to distinguish between bitcoin and the rest — so let us do that. Bitcoin has an underlying system with some similarities to more stable assets — it has often been called digital gold. But for a wholly new economic system, there are structural problems that also exist in conventional economies. As early as 2021 a study found that 0.01 percent of all bitcoin holders owned over 58 percent of all available bitcoin. The starting point is, to put it mildly, imbalanced.
Looking at other cryptocurrencies, one need look no further than the name of the platform where many so-called “memecoins” are produced — tokens whose purpose is pure speculation. It is called “Pump.fun.” Being on the receiving end of a pump-and-dump — even if you are aware of the risks — is not always as fun as the name implies. It resembles a casino, with bad odds. Those who stand to gain from a less regulated crypto market in the United States are therefore fairly easy to identify. One example is venture capital fund Andreessen Horowitz, whose crypto fund has 82 billion kronor of exposure in this area — the value of their holdings just increased substantially. Individual early bitcoin investors are another example. They are already in the market and have seen a near-extraordinary rise in value in a short time.
The losers will likely be those who are now looking at crypto for the first time and deciding to invest — or gamble, which is probably a better description. Who would not be tempted by a rise of over 30 percent in one month, as bitcoin has just delivered? For every buyer at the peak price, there is also a seller. The Biden administration has put significant pressure on the tech world in recent years — companies have been blocked from acquiring smaller competitors and criticism of the entire sector has at times been fierce. Big tech became a temporary pariah in American politics. They therefore placed their trust — and their money — on Trump and a new era. That investment now looks set to become one of the better ones made in Silicon Valley in many years.
