Senator Cynthia Loomis (R-WY) tweeted that she wants Trump to start a Strategic Bitcoin Reserve. It’s a terrible idea. It doesn’t matter if you are pro-Bitcoin or think it is a fraud reserved for drug dealers and scoundrels. It’s a terrible idea.
Strategic Oil Reserve is smart. It’s for national security. What is Bitcoin? How is it a function of national security?
I am a big fan of cryptocurrency but let’s be truthful. Nothing has been built on the rails of Bitcoin that make a difference in anyone’s daily life. I hear “they are building” and I am sure they are. Bitcoin and all cryptocurrencies have been hindered by over-regulation and actions by all governments. Seeing Gary Gensler go off to the sunset is one of the best things about the change in administration. He bankrupted three banks.
People don’t understand Bitcoin. It’s so foreign and it has been rare to see any independent entity have a medium of exchange that is universally accepted without the backing of a government.
In the beginning, there was a lot of fraud in Bitcoin and there still is. The SEC isn’t going to stop it. They can’t stop fraud with the US dollar and they can’t even stop Nancy Pelosi from insider trading.
First and foremost, Bitcoin is a network. It is software. Why does it have value? Because someone says it does. There is nothing that backs it today like fiat currency. The only thing backing it is hope and potential for the future.
Every cryptocurrency is the same. Eventually, they might become integral to our daily lives. But today, none of them are. No one needs it. You can survive without it. Crypto is purely a speculative instrument. It is the spec instrument in all of human history. Tulip bulbs could only bloom. Cryptocurrency can be markedly beneficial to our lives.
But again, Bitcoin and cryptocurrency are all talk and potential. Hope. But, soon things might change.
Is Bitcoin a store of value? No. Just check the value of Bitcoin when the market tanked after Biden was elected. If the stock market had a 1929 moment like the permabears are predicting, (If the market does drop, it won’t happen like 1929, or even 1987) Bitcoin isn’t going to hold its value. It’s not digital gold. It’s a piece of software with a network that is not powerful to date behind it.
The other reason to ignore the idea of a Strategic Bitcoin Reserve is because of all the different software innovations I have seen, cryptocurrency embodies the most free market and Coasian concepts ever. I think it can be a game changer for the marginal costs of a lot of things.
Because crypto incorporates the free market and Coase, the government should stay out of it. Establishing a Strategic Reserve will screw up the free market. It will put a de facto price floor into the market. Price floors screw up markets just like price ceilings screw them up.
The government should monitor the market, and lightly regulate the market, but shouldn’t participate in the market. One of Trump’s goals this term is getting the government out of all kinds of markets. There is no need to enter the crypto market.
Let the crypto market evolve on its own. Don’t over-regulate it. Don’t prop it up. Don’t try to kill it.
The last several days have shown that the crypto industry is a complete and total scam. Including Bitcoin. Makes the sports book industry look honest.
I agree. Her thinking, superficial as it is, stems from the school of thought that "government should be run like a business" plus wanting some good publicity for herself. Businesses have to make a profit in order to survive...you don't want your government making a profit. You don't want it running huge losses either. If Trump or anyone else does establish a BTC reserve it is an admission that your currency and your financial predicament have spun out of your own control. Stop spending, spur economic growth, watch long term rates ease as a result and the Bitcoin speculative mania will subside. Then BTC would have a chance at being a real medium of exchange. Today it's a volatile psuedo-dollar index.