The right-wing is really having a field day. This comes from a press release from wealth adviser De Vere:
The Trump administration's exploration of the creation of a national Strategic Bitcoin Reserve (SBR) signals the dawn of a global “crypto arms race,” predicts global financial giant deVere Group.
The bullish prediction from the CEO, Nigel Green, comes after President Donald Trump announced on Thursday that his administration will evaluate whether to create a “national digital asset stockpile”, although his executive order fell short of creating a Strategic Bitcoin Reserve outright.
Green can hardly contain his excitement, saying:
We believe that the US's Strategic Bitcoin Reserve is not just a possibility but an inevitability—one that would be expected to set off a cascade of similar policies worldwide.
This could be the beginning of a fundamental shift in how wealth and power are stored and protected. Countries around the world would then be – if they're not already, as reports suggest - racing to acquire Bitcoin in anticipation of its role as a cornerstone of a new global financial order.
And then they note:
The concept of a Strategic Bitcoin Reserve is grounded in logic that echoes the role of gold in central banks.
Bitcoin's capped supply of 21 million ensures scarcity, making it resistant to the inflationary pressures that plague fiat currencies. For the US, an SBR could serve as a hedge against currency devaluation while potentially appreciating in value to help reduce national debt.
The madness goes on:
The deVere CEO continues: “Bitcoin's ability to protect wealth against inflation is, many believe, unparalleled. By holding it as a reserve, the US not only shields its economy but also positions itself as a leader in the new financial era. This policy could be too strategically sound to ignore.”
Should the US formally adopt an SBR, it will act as a catalyst for other nations. Other economies, as well as major players like China and Russia, are likely to accelerate their Bitcoin accumulation strategies to avoid being left behind.
“This arms race would reshape global monetary systems, with countries vying to secure digital assets just as they did with gold,” explains Nigel Green.
“No major nation can afford to be sidelined in the digital economy. A world where states compete for cryptocurrency reserves would likely redefine the balance of economic power.”
I note all this for a simple reason: it reveals the economic madness gripping some as a consequence of Trump's return.
The gold standard and the inability to produce the credit required by a failing economy in the 1930s resulted in one of the worst economic eras in modern history and led to war.
Gold was not the basis for prosperity. The pretence that it had value by limiting the money supply delivered local economic destruction.
The idea that Bitcoin will hedge against inflation when its value swings so wildly is absurd and transparently wrong.
So, what is really happening here? This is economic FOMO - or the 'fear of missing out'. That is patently obvious in this sales pitch. The argument is:
- Bitcoin is going to be in short supply
- Trump is going to buy it for the USA
- That will threaten supply
- The price will rise
- You need to buy it now
- Others will after you do, and you'll see massive gains as a result
- Don't hesitate, or you'll be too late.
There is not a single rational economic reason for buying Bitcoin. It has no proven value. It swings violently in price. It is not usable in exchange, and when it is, it requires translation into another currency first. Fundamentally, it is not money. Nor is it anything else. It is just a contrived asset created by the power of marketing, but worthless once the hype is ripped away.
However, Trump is a sucker for the marketing. He might do what de Vere wants and create a US Bitcoin reserve. All that will guarantee is that the Trump crash, when it comes, will be even more painful than it would otherwise need to be. A lot of people are going to have their fingers burned, supposedly 'investing' in Bitcoin when all they are doing is paying a great deal for an entry in a ledger that of itself creates no value, has no value, and adds no value to anyone or anything.
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Its happening again
My father talked about the beautiful South American bonds that languished in the strongrooms in the Midland Bank Head Office in the 1930’s relic of a crash many years ago, the better the artwork the more money had been lost on them.
🙂
The language sounds just like “pump and dump”.
Yahoo! shares anyone?
It also sounds as if these crooks are worried that the basic MMT reality about what money is and what is possible with fiat currencies, is beginning to cut through with the public so they are trying this diversion. That’s good news – KUTGW!
How long till Rachel Reeves or Starmer announce the arrival of a “Great British Bitcoin?”
Meanwhile Reform UK try to ban QE and Fa***e lobbies for gold.
We are indeed deep down the rabbit hole.
Correct
Tulip bulbs.
Agreed
@ Andrew,
There’s more hype in that story than what actually took place. Peak speculation lasted all of 19 days before the Dutch government intervened. Prices had risen by a factor of 12, in November 1636, from the previous baseline (with some extreme outliers for a very few highly sought after examples).
Alarmed at what was happening, the government announced that futures contracts, for bulbs, need not be honoured on payment of a penalty. Prices continued to rise, but not as sharply, until the following February, when the government announced the penalty would be only a few percent of the contract.
Prices collapsed, there’s no data for the next few winters, but within a handful of years were trading at the previous baseline. The outcome was that the owners of the bulbs got about half of the pre spike value, but kept their assets. The speculators paid half the previous price of bulbs they did not receive.
Not much fuss, and no real drama, until over 200 years later, when a Scottish journalist, Charles Mackay, used the story in his book “Extraordinary Popular Delusions and the Madness of Crowds”. His primary and secondary sources were works of satire, not authentic accounts, and he sexed up the story in a way that would put a modern tabloid journalist to shame. Ever since, the tale has got taller with each retelling.
Note: the pre speculation prices were relatively high; about 50 times higher than the price in the long-term. But that was because they were novel and locally rare when they were introduced. Exactly the same process played out, some 80 years later with hyacinths. Their price also gradually fell to around 2% over the long-term, as supplies became more readily available through propagation.
If you’re right – and I have not done the research to check – you are still talking about a disordered market.
More importantly, there was a product. With Bitcoin that is missing. That is the problem wuth the analogy.
@ Richard,
I can see that there was a disordered market, but the Dutch government did make an early intervention; even if they then procrastinated for a further 7 weeks over a final decision. They certainly didn’t fan the flames.
It is fortunate that the entire episode played out over winter, when the assets were underground. Had it started a few months earlier, when the bulbs could be physically traded, then it could have been a lot worse.
The details can be found here:
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.history.com/news/tulip-mania-financial-crash-holland&ved=2ahUKEwj_jdC_qI6LAxXbTkEAHdYDMtsQFnoECDoQAQ&usg=AOvVaw1EURkIkzhaUsu2UpBBn7Pz
Which I could have done with finding, before my earlier post. I wasn’t wrong about the duration, but peak speculation occurred a few weeks later than I had recalled: November 25th to December 12th, not “in November”.
At least the tulip bulbs could still be eaten at the end of it all by some rather hungry investors. You can’t eat bitcoin.
It is surprising, or perhaps it shouldn’t be surprising who understands, or doesn’t understand the essential differences between a fiat currency, and a commodity, and something that isn’t either.
If a major economy wanted to “get into bitcoin” they probably wouldn’t buy it in the open market.
They would have the ability to build many data centers and power stations to “mine” their own coins in a way that would out compete almost every other miner. This would be disruptive for the whole ecosystem (not a bad thing)
It would also disrupt the climate system – not a good thing.
And use up real resources/spew even more CO2 into the atmosphere in the process? No thanks.
That’s a thought. If it crashed the whole BTC ecosystem it would be job done. And then the govt would have all that computing power for their mega AI project.
Actually that is not really possible because the total number of bitcoins is capped at 21 million and about 95% have been mined already.
See other comments in this thread
These deluded morons really think they hold the key to the real truth and we’re all blinded by our outmoded support of Money supply theory, central banks etc etc
They sound as mentally damaged as those QAnon believers or the flat earth feckwits.
Hubris & Hyperbole. In my simple way of looking at things, “the purpose of making an investment is the purchase of an income”. Interest, dividends, etc. That’s why I’m deeply sceptical about, for instance, gold as an ‘investment’. When I was learning my trade in the late 1980s, my mentor had a real gold ingot on his desk. When I asked him why, he responded “to remind me how useless it is – I can’t shave bits off to buy my shopping in Sainsbury’s, it doesn’t provide me with an income, I have to lock it in the safe at night, but I concede it is a good paperweight”. He could only make use of his ingot by selling it to someone else – the “greater fool theory” – and was dismissive of the idea that gold is described as a ‘store of value’ by the gold bugs.
I can’t see much, if anything, is different with the crypto Ponzi schemes!
Very good
I read a report (sorry, can’t find the quote now) of a private remark at Davos, to the effect that ‘when quantum decryption arrives (2030?) crypto/bitcoin will collapse’. Anyone know more about this?
Adrian,
Yesterday’s Sensemaker newsletter from Tortoise News mentioned it – that might be where you saw it?
“Looking down on Davos from the hotel where Thomas Mann set The Magic Mountain, a quantum physicist-turned-entrepreneur said in passing yesterday that as soon as quantum decryption becomes a reality – which the US government expects to be by 2030 – “bitcoin goes to zero”.”
Knowing as much about quantum computing as I do about crypto (essentially, nothing), I can’t comment on the suggestion.
Thanks
The issue is that breaking encryption algorithms by “brute force attacks” (think back to “colossus” running night and day to brute-force the Enigma code at Bletchley Park) requires v powerful computers. 256bit encryption (used on your email or internet traffic) takes a top notch computer today a VERY long time to break. Lots of sites discuss this.
Quantum computers could crack it much more quickly but when they will arrive on the market generally is hotly debated, so, the problem is a “simple” matter of developing the quantum computers.
This gentleman Mr. Schneir knows a fair bit about it. I came across him over a decade ago, he used to work for BT Group internationally, which meant he wasn’t v forthcoming about a privacy campaign I was involved in at the time that involved BT in unlawful surveillance of their customers, which got us interested in encryption, in fact their shenanigans probably accelerated the shift from http: to https: web traffic, thus slowing down the internet and ramping up its carbon footprint enormously.
I don’t understand ANY of the maths in the link, but he definitely does. He suggests it (breaking Bitcoin) won’t be happening for a few years yet. But it will happen.
https://www.schneier.com/blog/archives/2022/02/breaking-245-bit-elliptic-curve-encryption-with-a-quantum-computer.html
What this lot want to do is to get the US government to buy all the Bitcoin so they can all secure their ‘winnings’ into real money, i.e. $. The Public Purse is then left holding a worthless baby. This is much the same as e.g. Argentina’s $ debt. The wealthy get their assets out into the $ by getting the state to borrow $ to prop up the FX rate. They then dump the $ debt on the rest of the citizens to repay. Milei is back on the same trick as Argentina has resumed borrowing $.
Agreed, Tim.
So are they figuring this a bit like the sub-prime bubble, except this time they know precisely what they are doing? Get the US/UK gov’t etc to buy worthless debt and then when it crashes the public purse is left on the hook? Thus creating the need for more austerity etc?
That’s it
Same old story – suck in as many retail punters as possible and then dump and go short
Bitcoin seems to have been established with what you might call some sort of philosophy. Being used as a strategic reserve by the state controlling the dollar supply seems to be totally at odds with it. It was supposed to be independent of or even alternative to the state controlled money supplies. I doubt if the Trumpies have the faintest idea how bitcoin works. Creating their own crypto would be total insanity but there you go. Would the bitcoin miners even cooperate? I doubt it.
Since dipping into the world of crypto because the climatologist that I follow on YouTube started down that rabbit hole of bitcoin, I’ve learned substantially more about the area by following info security and crypto journalists on mastodon.
The fundamental premise of bitcoin that it’s a hedge against inflation because it’s been digitally granted the property of a scarce resource is an illusion, pure and simple.
You can double your balance in crypto very simply, by forking the ledger. This has already happened with bitcoin (look up Bitcoin classic). If you need more coin? Start a new Blockchain.
The resource “discipline” derives from the upper limit on the amount of coin that can be mined and that this limit will exhaust itself around 2140. The detail here is that this exhaust follows a power law. 19 million of the 21 million coins that can be mined already been mined and very early on by Chinese owned data centers. The CCP put an end to data mining in China probably because of the energy demands. But the remaining major figures in mining are a few very large companies in the United States and Russia. Russia is subsidizing the process’ energy needs. No matter, they are expanding immense resources to collect a tiny fraction of the remaining mineable coins.
Fans of bitcoin have been fooled with the premise that this distributed ledger is independent of any one party. They do not understand that the vast majority of the processing resources, access annd ownership of bitcoin, are in the hands of billionaires.
Double think is endemic to crypto. The meme coin crowd are now declaring that Trump can use his coin to pay off the national debt. All of it is ultimately predicated on printing more dollars to buy meme coin or bitcoin. In order to “pay off” the money supply.
This is absolutely a global scale shell game in Ponzi scheme. And I think it’s imperative to expose it as such.
Thank you
This branching issue is very little known, but appears commonplace.
The new Trump administration is a pump and dump Ponzi Scheme.
Genuine question, because I really struggle to get my head around crypto – if bitcoin is limited to 21 million coins, how can Trump just ‘create’ new coins, and therefore what would stop others doing the same thing?
He will have to buy existing coins, increasing the price. That is the real aim.
I’ve worked in crypto, so I may be biased, but not all are the same. I’ve been skeptical about bitcoin because it can only really be treated as a commodity, and others like Ethereum and Solana support the creation of novel and useful contracts which enforce rules of varying sophistication, and I think the potential of these have only been partially explored.
As a store of value, bitcoin has seen various cycles with peaks and troughs that follow a pattern that fully pre-dates any potential government adoption. I have serious concerns that Trump is acting illegally in having substantial assets in crypto (particularly $TRUMP) and is able to mandate a federal reserve, giving rise to a clear conflict of interest, but in itself, Bitcoin has proven to have a lasting popularity quite different to memecoins and alt-coins like DOGE. A crash to zero has been predicted multiple times before and those saying to believe and it will reach new highs are the ones that have done best so long as stop losses haven’t been triggered in the meantime and so long as they’ve not be stupid enough to buy a Trump-branded meme coin.
I’m not particularly against some kind of government reserve, but an obvious question is why it should necessarily be something like Bitcoin and not something more specifically tied to US currency or assets. After all, introducing greater liquidity in pre-public businesses (e.g. with Initial Coin Offerings or tokenisation of some shares in a company) can potentially allow some profit-taking from businesses by individuals involved in building early-stage companies, and if that provides some financial security to those further down the ladder, or helps to provide capital for starting a new business, then there are specific ways such digital representation can be useful. That doesn’t inherently need crypocurrencies, but they do offer a digital ledger and verifiable rules to enable control against some of the abuses possible in a less rigidly defined system. That’s the real value, and why some like Ripple are interesting. It’s just a shame as much of the attention is taken up by mass-generated NFTs, celebrity-endorsed s%$£ coins and other things which more realistically can be accused of adding little to no value.
I think you are wandering into the realms of fantasy with your justifications. Initial coin offerings? Sorry – but that is just not credible. It would also require that people subscribe real cash. Bitcoin is all a myth.
Modern money is also a myth. We wouldn’t want to go back to the golf standards or shells or physical commodities only, so it doesn’t really matter what we create as a proxy so much as the trust and rules by which it operates.
Currency reduced trading friction. Moving away from the gold standard allowed debt for growth. However, all currencies have the theoretical risk of an event tanking the value of a currency, such as printing too much money or the loss of sovereignty. Cryptocurrencies like bitcoin have neither of those risks, hence the appeal. They have entirely different risks, included the theoretical control of over half the network to defraud the system, or hacks to private keys.
The distributed ledger is interesting as a way of creating trust separate to sovereignty and separate from individual entity control. Privacy-based options like Monero have particular use cases, too (including protection from oppression, not just buying drugs, etc).
Is there a bitcoin bubble at the moment? Possibly, it’s at record highs, and has a history of crashing down a long way before the next cycle. Look at the charts from it’s whole history going back well over a decade, and ask what now might realistically cause a crash to zero. Quantum computing hacks, possibly, but it has faced necessary forks including hard forks before to resolve issues. Investing in crypto is risky, but betting a crash to zero any time soon would be much more so.
If you believe governments will fail fiat currency might. But then you have bigger worries.
Your attempts to justify Bitcoin are pretty weak, and I have given you the chance of having several attempts. I might not bother again. You are basically supporting the ponzi.
“Modern money”, is not ‘modern’ in the sense you assume…
…’money’, along with its definition by the state (backed by law), was nothing less than one of the key innovations that gave birth to our civilisation.
Forgot to add this link above to James K. Galbraith’s article quoting Keynes…
https://thebftonline.com/2020/12/24/whos-afraid-of-mmt/
I just encountered an interesting statistic – that just 2% of Bitcoin holders own over 90% of Bitcoin in circulation. This is from Thom Hartman’s blog, and he’s usually reliable.
This pretty much matches general wealth distribution in the West. It’s a clear indicator of who benefits most when the Bitcoin price rises. So why would Trump & co be interested in the US taking a big stake again?
Now that is interesting ….
Trump clearly stands to gain from crypto rising, as do Musk and others in his cabal.
That’s why there’s already impeachment requests over emolument violations – the conflict of interest and potential for corrupt enrichment is massive – potentially tens of billions for Trump.