Generated Title: Trump's Crypto Pardon: Ignorance or Calculated Risk?
Donald Trump's recent pardon of crypto tycoon Changpeng Zhao (CZ), the co-founder of Binance, has raised eyebrows, especially given Trump's claim of ignorance regarding Zhao's identity. This situation presents a fascinating case study in the intersection of cryptocurrency, politics, and potential financial motives. Let's dissect the available information.
The Pardon and the Denials
Trump, in a CBS News 60 Minutes interview, stated, "I don't know who he is" when questioned about pardoning Zhao, who pleaded guilty to enabling money laundering in 2023. He further claimed he was told Zhao was a victim of a "witch hunt" by the Biden administration. Meanwhile, White House Press Secretary Karoline Leavitt defended the pardon as correcting an "overly prosecuted case" and a "war on cryptocurrency" by the Biden administration.
This denial is perplexing, considering the growing connections between Trump's circle and the crypto world. Zhao's companies have partnered with firms linked to Trump on digital-currency projects, including Dominari Holdings, where Trump's sons sit on the board of advisers. The question then becomes: is Trump's claim of ignorance genuine, or is it a calculated attempt to distance himself from potential scrutiny?
Crypto's Murky Waters and Political Alliances
The crypto landscape is rife with regulatory uncertainty, making it a fertile ground for political maneuvering. Trump's apparent embrace of cryptocurrency, stating the US needs to lead in the industry to avoid China gaining an advantage, hints at a strategic play. He's previously halted a fraud case against crypto entrepreneur Justin Sun after investments in the Trump family's crypto firm, World Liberty Financial.
In May, it was announced that a stablecoin launched by World Liberty Financial would be used by an Abu Dhabi firm for a $2 billion investment in Binance. These connections, while not direct, paint a picture of increasing involvement in the crypto space—something that makes his denial all the more suspect.
Moreover, Trump has also pardoned founders of the crypto exchange BitMEX, who faced charges related to money laundering, and Ross Ulbricht, founder of the Silk Road, the dark web marketplace known as a place for drug trade. This pattern suggests a deliberate alignment with the crypto community, regardless of past transgressions.
The DAT Landscape: Buybacks and Potential Pitfalls
The pardon comes at a time when the crypto market is seeing increased activity in Digital Asset Treasuries (DATs). These firms, which hold significant amounts of cryptocurrency, are facing pressure to manage their net asset value (NAV) multiples. Some, like ETHZilla, have even sold off portions of their holdings to fund buybacks (selling $40 million of its ETH last week to fund a buyback, to be exact).
This raises concerns about a potential "DAT death spiral," where prolonged sub-NAV trading leads to accelerated treasury selling, falling NAV, and mounting pressure on the shares. As Brian Rudick, chief strategy officer of Solana DAT Upexi, noted, over-leverage could trigger a scenario where a treasury company is forced to sell cryptocurrency at an inopportune time to repay dollar-denominated debt.
And this is the part of the analysis that I find genuinely concerning: the intersection of political pardons with potentially unstable financial instruments. If Trump is indeed positioning himself as a crypto advocate, his actions could inadvertently prop up DATs, regardless of their underlying financial health.
The Long Game: 2025 and Beyond
Looking ahead, the crypto market faces potential headwinds. Bitcoin recently hovered near $108,000, and Ethereum traded around $3,750, reflecting cautious positioning ahead of U.S. employment reports. Treasury Secretary Scott Bessent has warned that high interest rates "may have driven" parts of the economy into recession, fueling debate over whether future rate cuts would signal strength or stress. Crypto Prices Slip Ahead of US Jobs Data as Bessent Flags Rate Risks
On-chain data shows Bitcoin stuck below a key $113,000 cost-basis level. A sustained break lower raises the risk of a deeper pullback, with the next significant support near $88,000. This volatility, coupled with the inherent risks of DATs, creates a precarious environment.
It's worth noting (parenthetical clarification here) that the long-term success of DATs depends on capital discipline and efficient asset management. As Mathijs van Esch, general partner at Maven 11, pointed out, a DAT has a higher cost basis to just hold digital assets; if they do not manage to utilize those assets efficiently (e.g. earn yield) to make up for those costs, their asset basis will erode from asset management fees, operating company fees and other costs involved with maintaining the vehicle.
Is Trump Playing 4D Chess...Or Just Clueless?
Trump's pardon of Changpeng Zhao, coupled with his professed ignorance, raises serious questions about his understanding of and motivations within the crypto space. Whether it's a calculated risk to court the crypto community or genuine obliviousness, the potential implications for the market and the stability of DATs are significant. The data suggests a pattern of behavior that warrants close scrutiny.
