I will start this discussion by explaining that I have now voted for President Trump three times because I believe he is the right person at the right time for the job of President. But I also start with the understanding that he is a risk taker and businessman first and a politician second. I hope that he keeps his priorities in that order.
I will also confess that I am not a crypto enthusiast and consider it the fiat of all fiats. It is not a currency, a store of value, or a medium of exchange. Its professed strength (dissociation from any government) is also its greatest weakness. In my opinion, financial fiat instruments (things) are dependent on stable governments, standing militaries, and taxing power. Bitcoin has none of these, and if we add to that historical significance, then Bitcoin will fail every test.
The 2024 Campaign
I am always disturbed by the level of today’s campaign contributions, which is one of the Supreme Court’s significant mistakes in recent decades. We all know that party affiliation is not an issue here; political corruption is at stake. Allowing the creation of PACs and unlimited contributions has had a dilatory effect on our elections. So, I watch who gives the most and how that swings politicians’ post-election actions. They always say it is unimportant in their political calculus, but that is difficult to believe, and history proves otherwise.
The Supreme Court decision raised the stakes for both parties and permanently closed the door to a third party. Even with unlimited donations and PACs, there is not enough money floating around to fund three candidates, at least not yet. President Trump raised $1.439 billion, while Vice President Harris raised an eye-popping $1.995 billion. Each candidate raised about $500 million more than in the 2020 race.
In the 2024 Presidential cycle, the crypto industry was the largest group that donated to campaigns. With total contributions topping $250 million, either party would look favorably on crypto after the election. We are in an unusual situation with President Biden checking out and President Trump acting like he is in office. All eyes and ears are on President Trump, and he has already made several pronouncements that favor crypto assets, which have advanced the price so that Bitcoin has doubled in value. Even though he has tried to walk back some crypto pronouncements, it has not worked.
The $48,700 increase in the price of one Bitcoin is worth almost $900 billion across all Bitcoins. So, their $250 million campaign “investment” has already paid off 3,600 to one for the crypto industry and Crypto-Bros. If you owned just one Bitcoin on September 1 and then sold it on December 17, you made a profit of $48,733 or 85%. The Crypto-Bros may be strange, but they are not stupid. (See calculations below.)
Fascinatingly, this discussion takes on a mystical and mythical tone as devotees, advocates, and skeptics spar over this unfamiliar future. It is easy to see why. Bitcoin, which has no intrinsic or true fiat value, reached a market value of $2.1 trillion at its peak on December 17, 2024. Bitcoin thrives on rumors and visions of the future, so influence buying during the election stirred this pot to a boil.
What is Next for Crypto
The Bitcoin Act of 2024 (S.4912) introduced the concept of swapping out some of our gold reserves for Bitcoin. This would be done with a bit of “sleight of hand,” where the Treasury prints new gold certificates that it sells to itself to buy Bitcoin. Sold as “free” to taxpayers, this is a disaster. The net effect is to swap something of historical and tangible value for a purely speculative asset with questionable value. Sponsored by Senator Cynthia Lummis of Wyoming, this could spell disaster if there are short-term gains that suck Congress and the Treasury into more swaps.
Senator Lummis, a Republican, is hailed as an innovator and early purchaser of Bitcoin. To her colleagues, she looks like just the innovator we need for the twenty-first century. However, as a Bitcoin owner, she can profit handsomely if the Bill passes, perhaps something she learned by watching Nancy Pelosi. To her credit, her Crypto assets are in a blind trust, but if her trust kept her reported Bitcoin, she has profited handsomely already.
With hints of the United States becoming the crypto capital of the world, the price could go up even further (or not, who knows). President Trump has already created new crypto positions within his administration and has hinted at adding 1 million Bitcoin to our financial reserves. This will only make sense if we aim to make Bitcoin the world reserve something (exchange standard) and own all of it. Any other move would unseat the dollar and create a disaster for our economy.
My concern is that anyone in the Government over fifty has little understanding of crypto or blockchain beyond the constant hype. They have little chance of differentiating between Bitcoin, Dogecoin, and Ethereum. Their ability to foresee the implications of a crypto-centric world financial system is less than zero. For a group of learned people from Ivy League schools, they cannot even make a budget, much less understand world finance. Those in Congress must consult with their grandchildren for advice, a financial source as dependable as Greta Thunberg.
We also know from recent years that neither the Fed nor the Treasury has these skills. With crypto, the goal should be to move slowly and think through the ramifications of every change.
Crypto or Gold
The United States currently has the world’s largest gold reserves, but in my opinion, they should be much higher. However, the United States is in a catch-22 concerning these reserves. Logically, we should print as many dollars as the world will tolerate and use the dollars to buy gold or other tangible things. However, as the world’s reserve currency, the United States cannot buy gold for its reserves without admitting that gold is of greater value. If Senate Bill 4912 goes through, Congress will probably go further down this rabbit hole and swap more gold for Bitcoin.
Fiat currencies and crypto rely on the “greater fool” economic theory, and so long as we do not blink, then the financial Ship of State sails on. The crypto reserves discussion may keep the ship afloat long enough to take some corrective measures. Let us hope so!
But our enemies are not bound by this gold versus fiat reserve currency debate. They can pick and choose what assets to hold as reserves, and right now, they are shedding dollars, buying gold, and planning on digital currencies in the form of either CBDCs or crypto like Bitcoin. By doing so, they shake Congress’ confidence in the dollar and encourage more irrationality. If all the world’s major powers pile into Bitcoin as a reserve, they will artificially drive the price up in the short term, creating a false sense of value and wealth.
Assuming Warren Buffett and Charlie Monger are right, and they usually are, Bitcoin is still ripe for easy pickings.
“I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air,”
Charlie Munger
In fascinating discussions about crypto, it is fun to watch as investment “professionals,” and commentators try to explain what crypto is and why you should or should not own it. People who do this for a living should know what it is before they either recommend it or trade it. But for some reason, they cannot agree. Some believe it is digital gold; some favor it as a dollar substitute; some think only the blockchain has value, and a few talk about it all in ethereal terms that you cannot logically follow. There is still a cult aspect to crypto that is difficult to understand and much less explain.
To build our confidence Fed Chairman Jerome Powell recently helped by proclaiming this about Bitcoin and crypto.
“We’re not allowed to own Bitcoin. The Federal Reserve Act says what we can own, and we’re not looking for a law change.
Chairman Jerome Powell
Chairman Powell had better tell Congress because Senate Bill 4912 would require the Fed to use its first $6 billion profit each year to buy Bitcoin until it reaches 1 million coins. Buying 1 million Bitcoin would be twenty percent of the total and force an artificial demand that will drive speculative prices up. Speculative bubbles have a way of bursting dramatically and spectacularly. Powell believes that Bitcoin competes with gold and not the dollar, but his track record in recent years has been questionable on many fronts.
“It’s still putting government money on the line, and Bitcoin has not shown itself to be a particularly stable asset. The bill asks Senators and members of Congress, who may not understand crypto that well, to make a much bigger leap of faith in terms of its long-term viability.”
Jennifer J. Schulp, CATO Institute
In my opinion, crypto is not digital gold. For some, gold also has a cult-like feel, with gold advocates and “bugs” sticking by the metal through thick and thin. But gold has some historical bona fides that crypto lacks. The successful historical use of gold as a currency backing and its intrinsic value lends weight to it that crypto lacks. Gold is limited in quantity, un-hackable, verifiable, transferable, and untraceable. These characteristics are the same as those touted for crypto. The only advantages crypto has over gold are its ease of storage and transfer of value between parties.
Also, I believe crypto is not a substitute for the dollar. Crypto lacks widespread acceptance, ease of transaction, and stability of fiat currencies. As bad as fiat currencies are, they are infinitely more stable than Bitcoin.
Building Crypto Expertise
Since it is a bad idea, Congress will likely move ahead with Senate Bill 4912 or a refined version. To go down this road successfully, we can thank President Biden. His latest pardons and commutations have shown us a path of redemption for criminals.
Many people in our jails have extraordinary knowledge and experience in the crypto world. Pardoning some or all of them and giving them jobs with high-security clearance could unleash the innovation and skill we need to jump-start the implementation. Some of these may already be friends of Hunter Biden’s, but there is no way to know.
Ross Ulbricht, the creator of the “Silk Road” dark website used for drug dealings, child pornography, murder for hire, and all other manners of societal decay, is wasting away serving a life sentence at the Florence High Penitentiary in Colorado.
Sam Bankman-Fried, the creator of the FTX Crypto Exchange, has unusual skills and talents. Unfortunately, he is serving a twenty-five-year sentence for securities fraud, money laundering, and campaign finance law violations. His expertise in bribery, marketing, and influence peddling is going to waste. He has recently shared a cell with Sean “P Diddy” Combs in the Brooklyn Metropolitan Detention Center, where he may acquire other skills that will build his resume.
Heather Morgan (aka “The Crocodile of Wall Street” and aka “Razzlekhan”), wife of Ilya Lichtenstein (aka “Dutch.”) Together, they stole 119,756 Bitcoin back when Bitcoin was much cheaper and only worth about $70 million. At today’s prices, their haul would be worth $12 billion. The “Croc” hid in plain sight, making nonsensical rap videos, and the pair evaded capture for years. They became experts at hiding Bitcoin through shell companies, gold purchases, and prepaid cards. In a strange twist, when the original Bitcoin holders are finally reimbursed for their seized assets, they will make a small fortune. This pair had good connections and will serve five years or less in prison for their crimes. Their addition to the group of Crypto-Bros would bring some rhythm, levity, and cheer for the effort.
With the stroke of a pen, either President Biden or President Trump can use these individuals or other skilled Crypto-Bros to help perpetuate the most incredible “Pump and Dump” scheme in history. President Biden set us on the path of ignoring ethics and pardoning crooks at will. We need the skills of these crooks to set the trap.
Relevance to our Debt
Senator Lummis and others have stated that the goal of this Crypto reserve would be to wipe out half of our national debt, which is ambitious and a little confusing. Our debt is currently $36 trillion, growing about $2 trillion annually. When this strategy is implemented, the debt will approach $40 trillion, a good round number to work with.
To wipe out half of our national debt with 1 million Bitcoin will take some financial gymnastics that has never been performed before and may be impossible. It is not that the value of the Bitcoin reserve would need to be $20 trillion, but that the gain on the Bitcoin would need to be $20 trillion. This sets the minimum value of each Bitcoin at $20 million plus the purchase price. The purchase price will rise quickly as the U.S. Government pumps the price, so the actual cost is unknown.
Let us assume for a moment that these valuations can be reached. This would put the federal government in a position where it perpetuated the most incredible “Pump and Dump” market scheme in the history of the world. They would have created an artificial demand by purchasing almost 5% of all Bitcoin, driving the cost up while touting its value as a reserve asset.
Wiping out the national debt can only be done if a buyer is willing to pay the inflated $20 million+ per coin price tag, which seems unlikely. We would pretend to use unrealized gains on the Bitcoin Reserve to offset realized losses in social programs or interest on debt, another financial gymnastics move that has never been tried.
But where there is a will, there is a way. The federal government can dump these coins on consumers or third-world countries, touting them as a new and better form of central bank reserves. If accomplished, then we will have located the greater fool!
The $20 million per coin price tag is irrelevant for most consumers. Enter the Satoshi (Sats), the smallest sub-unit of a Bitcoin worth a one-hundred-millionth ($0.00000001) of one Bitcoin. At the $20 million price tag, consumers can buy into the scheme for only one Sat or $0.20. So, this scheme (scam) fits all wallets, and the Fed knows it.
The Madness of Crowds
Having said all of this and looked at all of this, we should never underestimate the power of herds and the manic/depressive nature of gambling. Many will pile into Bitcoin; some will make a lot of money, but like stocks, most will pile in too late and stay long enough to lose a lot of money. Tread carefully and seek as much information and advice as possible in this new, poorly understood “investment” area.
This might also create Bitcoin Oligarchs, something new in America. However, even Bitcoin oligarchs need to be careful and remember the lessons learned from FDR. The Feds can legislate a required confiscation of all Bitcoin to build our strategic reserve.
When governments move money, it is a different world than the consumer markets. One can get crushed in the rounding-off numbers for a central bank.
Bitcoin and Gold Calculations
Source: Yahoo!Finance.com Blockchain.com
- Maximum Bitcoin Issue = 21,000,000
- Total Bitcoin on 12/30/2024 = 19,802,727
- Price of One Bitcoin 12/30/2024 = $92,652.68
- Total Value All Bitcoin 12/30/2024 = $1,834,775,729,433
- Total Bitcoin on 9/1/2024 = 19,747,585
- Price of One Bitcoin 9/1/2024 = $57,322.52
- Total Value All Bitcoin 9/1/2024 = $1,131,981,336,114
- Total Coin Growth 9/1/24 – 12/30/24 = 55,142
- Price Change 9/1/24 – 12/30/24 = $35,330.16
- Price Change % 9/1/24 – 12/30/24 = $35,330.16/$57,322.52 = 61.63%
- Price Change at Peak 12/17/24 = $106,056.01 – $57,322.52 = $48,733.49
- Price Change % at Peak 12/17/24 = $48,733.49/$57,322.52 = 85.01%
- Total Value All Bitcoin at Peak 19,802,727 * $106,056.01 = $2,100,198,212,739
- Ounces of Gold in Fort Knox = 261,500,000
- Price of Gold on 12/30/2024 = $2,616.50
- Value of Gold Reserves = $684,214,750,000
- Total U.S. Debt = $36 trillion + growth at $2 trillion annually
- Half of U.S. Debt Needed to Convert to Bitcoin = $20 trillion
- Value of One Bitcoin to Convert half our debt = $40,000,000,000,000/2/1,000,000 = $20,000,000
- Value of all potential Bitcoin at $20,000,000 = $420,000,000,000,000
Resources and Further Reading
‘Big News’—Donald Trump Declares ‘Crypto Is The Future’ After Blowing Up The Bitcoin Price, By Billy Bambrough, Forbes, forbes.com, October 15, 2024.
‘Crypto bro’ isn’t just slang, New research shows the industry is dominated by men, By Marco Quiroz-Gutierrez, Fortune, fortune.com, July 21, 2022.
‘Delusional’ Trump Bitcoin Price Warning Suddenly Rocks Crypto Market, By Billy Bambrough, Forbes, forbes.com, December 31, 2024.
Bitfinex Hacker Sentenced in Money Laundering Conspiracy Involving Billions in Stolen Cryptocurrency, U.S. Attorney’s Office, justice.gov, November 14, 2024.
BRICS Summit 2024: China, Russia, Iran Urge for Crypto Payments in De-Dollarization Effort, By Landon Manning, Updated by Harsh Notaria, BE(in)CRYPTO, beincrypto.com, October 24, 2024.
BRICS to Leverage Cryptocurrencies for Secure Investment Payments, By Oluwapelumi Adejumo, BE(in)CRYPTO, beincrypto.com, October 19, 2024.
Charlie Munger calls bitcoin ‘disgusting and contrary to the interests of civilization’, By Yun Li, CNBC, cnbc.com, May 1, 2021.
Coinbase CEO, Other Crypto Insiders Billions Richer After Seeking to Steer Elections, By Jesse Hamilton, CoinDesk, coindesk.com, December 24, 2024.
‘Crocodile of Wall Street’ Heather Morgan and husband Ilya Lichtenstein reach plea deal a year after being charged with laundering $4.5billion in stolen Bitfinex crypto, By Jen Smith and Keith Griffith, Daily Mail, dailymail.uk.co, July 21, 2023.
Crypto cash helped propel allies to victory during the 2024 election. Here’s how it might impact Washington., By Margaret Brennan, Aliza Chassan, Andy Court, Annabelle Hanflig, and Richard Escobedo, CBS News, cbsnews.com, December 8, 2024.
Crypto Donations Reach $238 Million in US 2024 Election, Trump Receives the Most, By Syed Ali Haider, Crypto2Community, crypto2community.com, November 5, 2024.
Crypto in Congress: Who Has Skin in the Game?, By Justin Kuepper, ZenLedger, zenledger.io, September 18, 2024.
Crypto Industry Political Donations Top $200M: Biggest Donors in the 2024 Presidential Race, By Prashant Jha, CCN, ccn.com, October 30, 2024.
Crypto Moguls Reap Billions in Wealth After Pro-Crypto U.S. Election Outcomes: Report, By Ahmed Ishtiaque, Brave New Coin, bravenewcoin.com, December 28, 2024.
Crypto Sicko Mode Is Here to Stay: The cryptocurrency world isn’t waiting for Donald Trump’s inauguration to make a whole bunch of fast money, By Matt Stieb, Intelligencer, nymag.com, December 19, 2024.
Does Barron Trump really have 4 crypto wallets? Why it matters, By Times of India, timesofindia.com, September 18, 2024.
Fed Chair Jerome Powell Says, ‘We’re Not Allowed to Own Bitcoin’ Amid Trump’s Push for Bitcoin Strategic Reserve, By Mehab Qureshi, TheStreet, thestreet.com, December 18, 2024.
How Many Bitcoins are There? BTC Supply Explained, By Kane Pepi, CryptoNews, cryptonews.com, August 30, 2024.
Musk Says a Pardon for Sam Bankman-Fried ‘Will Fetch a High Price’ as the FTX Founder’s Lieutenants Get Shortened Sentences, By A. R. Hoffman, New York Sun, nysun.com, December 28, 2024.
New research dispels the “crypto bro” stereotype, By Eric W. Dolan, PsyPost, psypost.org, February 15, 2024.
Razzlekhan and husband guilty of $4.5bn Bitcoin launder, By Joe Tidy, BBC, bbc.com, August 3, 2023.
S.4912 – BITCOIN Act of 2024, By 118th Congress (2023-2024), Congress.gov, congress.gov, July 31, 2024.
SoFi Stock Didn’t Get Enough of a ‘Trump Bump.’ How Other Payment Companies Fared, By Emily Dattilo, Barron’s, barrons.com, November 2024.
SoftBank Group, Wikipedia, wikipedia.org, Last accessed December 29, 2024.
SoftBank pledges $100B to create 100,000 U.S. tech jobs, By Maria Statchstein, Digital Marketing News, dmnews.com, December 23, 2024.
SoftBank writes down nearly $100 million investment in FTX, By Mary Ann Azevedo, Techcrunch, techcrunch.com, November 14, 2022.
SoftBank’s WeWork, once most valuable US startup, succumbs to bankruptcy, By Reuters, Reuters, reuters.com, November 7, 2023.
SVB Collapse Trains Spotlight on Softbank’s Startup Financing, By Zheping Huang, Jane Zhang, and Min Jelong Lee, Bloomberg, bloomberg.com, March 13, 2023.
The crypto bros who dream of crowdfunding a new country, By Gabriel Gatehouse, BBC. bbc.com, September 19, 2024.
The crypto trio: How the cryptocurrency industry has made its mark on 2024 elections, By Maia Cook, Open Secrets, opensecrets.org, November 1, 2024.
The Three Pillars of the Bro-Economy: Day-trading, sports betting, and crypto are about to get bigger., By Annie Lowery, The Atlantic, theatlantic.com, November 19, 2024.
There’s a shocking similarity between the downfall of FTX and the implosion of Silicon Valley Bank, Fundstrat says, By Matthew Fox, Business Insider, businessinsider.com, March 13, 2023.
Trump and his family jump into crypto, which the FBI calls a hive of ‘pervasive’ criminality, Los Angeles Times, latimes.com, September 18, 2024.
Trump and SoftBank CEO Unveil $100 Billion Investment in U.S., By Alex Leary and Eliot Brown, The Wall Street Journal, wsj.com, December 16, 2024.
Trump announces $100 billion in investment by Japanese bank and tech giant to create jobs in U.S., By Bill Mordock and Mallory Wilson, The Washington Times, washingtontimes.com, December 16, 2024.
Trump Is Ready to Unleash Bitcoin and Other Cryptos. Hang On to Your Wallets., By Andy Serwer, Barrons, barrons.com, December 8, 2024.
Trump PAC has raised about $7.5 million in crypto donations since early June, By MacKenzie Sigalos, CNBC, cnbc.com, October 16, 2024.
Trump Picks Bo Hines to Lead Presidential Crypto Council, By Andrew Hayward, Decrypt, decrypt.co, December 22, 2024.
Trump’s crypto team takes shape but questions remain over who will drive policy, By Hannah Lang and Michelle Price, Reuters, reuters.com, December 6, 2024.
Various Searches on Campaign Financing, OpenSecrets.org, opensecrets.org, Last accessed December 28, 2024.
What I learned from the words and rhymes of alleged Bitcoin launderer Razzlekhan, By Mitchell Clark, The Verge, theverge.com, February 22, 2022.
What Trump’s Election Really Means For Crypto, By Jon Helgi Egilsson, Forbes Digital Assets, forbes.com, November 8, 2024.
Who were the 2024 election’s “crypto voters”?, By Bill McCandless Farmer, CBS News, cbsnews.com, December 8, 2024.
Why is tech giant SoftBank investing over $100 billion in the US?, By Elaine Kurtenbach, ABC News: Associated Press, abcnews.go.com, December 24, 2024.
Why Signature Bank’s Failure Could Be a Huge Setback for the Crypto Industry, By Andrew R. Chow, Time, time.com, March 16, 2023.
Why Silicon Valley Bank collapsed and what it could mean, By Hanna Ziady, CNN, cnn.com, March 13, 2023.
