“Bitcoin is to blame” for Donald Trump's growing support among prominent tech figures, billionaire Trump critic Mark Cuban has argued, presenting the controversial (and, as Cuban puts it, “contrary”) theory that a potential deterioration of the US economy under Trump will make major Silicon Valley bitcoin investors even wealthier.
Billionaire Mark Cuban believes there's more to Silicon Valley's support for Trump than just surface reasons.
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Key Takeaways
- “There are no better conditions for an acceleration in the price of BTC than a Trump presidency,” Cuban said in a Wednesday post on X, arguing that this is not due to Trump's plans to deregulate the cryptocurrency industry, but rather the aftereffects of his broader economic vision.
- Cuban predicts that tax cuts and higher tariffs, especially on imports from China, will worsen inflation, and higher inflation typically leads investors to move money into assets seen as more likely to store value, such as commodities like gold and safe-haven currencies, most notably the U.S. dollar.
- But “global uncertainty about the geopolitical role of the United States” under the Trump administration could lead to “the decline of the dollar as the reserve currency of choice,” Cuban theorized, suggesting the possibility of “hyperinflation,” in which the price of currency issued by a nation's central bank would skyrocket.
- The dollar's decline will drive markets into the new de facto “global currency,” Bitcoin, which its proponents have long touted as the ultimate safe haven asset because it is not backed by a central bank and is relatively independent from the global financial and political systems. As a result, the digital asset's scarcity will cause Bitcoin prices to soar.
- Cuban noted that this could mean that many bitcoin holders, such as Trump supporter Elon Musk (whose companies SpaceX and Tesla hold large amounts of the token) and early bitcoin investors and pro-Trump donors Cameron and Tyler Winklevoss, will become enormously wealthy.
Contra
Of course, Cuban acknowledges that his theory is a “contrarian” and probably “crazy” theory, but there are many things to take away from his argument. First, periods of high inflation are bad for most industries, because lower consumer purchasing power generally leads to lower profits, which in turn leads to lower company values as profitability declines.
Essentially, to truly benefit from the scenario Cuban outlined, in which Bitcoin emerges as the rest of the economy collapses, one would need to have very heavy exposure to Bitcoin in their portfolio and very little exposure to cash or U.S. Treasuries.
This doesn't apply to many of the big tech Trump supporters who are heavily invested in public and private companies, such as Musk, who owns more than $100 billion of Tesla's publicly traded stock, or venture capitalists like Marc Andreessen and Ben Horowitz. A simple calculation would suggest that Tesla will hold 9,720 bitcoin at the end of 2023, worth about $6.3 billion at a bitcoin price of about $65,000 on Wednesday. If bitcoin's price triples, Tesla would hold nearly $20 billion in stock, which would amount to less than 3% of the company's $800 billion market capitalization and make little difference.
Important Quotes
When asked by Forbes about the reasons behind the apparent discrepancy between Bitcoin's value rising and all other investments falling in value in a high-inflation scenario, Cuban explained in an email that corporate stakeholders are dealing with “uncertainty of execution and market forces” and the “incredibly difficult” process of passing legislation favorable to corporate valuations. But “in the case of BTC, all you have to do is hit the refresh button :),” Cuban wrote.
Main Background
Cuban, whose fortune is estimated by Forbes at $5.4 billion, made his fortune selling early streaming service Broadcast.com during the dot-com bubble in the 1990s and was a majority owner of the NBA's Dallas Mavericks from 2000 to 2023. “Shark Tank”'s Cuban and “The Apprentice”'s Trump (worth $6.1 billion) both rose to fame on reality business TV shows, but Cuban, a staunch Biden supporter, told Forbes in 2020 he had no plans to enter politics despite rumors of a presidential run.
tangent
Several prominent figures in the historically left-leaning Silicon Valley voiced their support for Trump over the past week, including Musk on Saturday and Andreessen and Horowitz on Monday. Horowitz and Andreessen told employees of influential Silicon Valley investment firms they would donate to a political action committee that would support Trump's election. Horowitz described Trump as the “right choice” for the tech industry as the Biden administration regulates industries such as artificial intelligence and cryptocurrency.
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