The Strategic Crypto Swindle

Market cap does not equal value... Market cap does not equal value... Market cap does not equal value...

Don’t forget about the inert hypersonic missile that hit Ukraine a while back, that was purely a show of force

Ignoring arguments on semantics (the meaning of "strategic"), here's the difference between AAPL or NVDA and Bitcoin.

In the long term AAPL and NVDA market cap / stock price will converge to their future financial performance and historically speaking it's guaranteed that those companies will decline. So if you're looking for a really long term investment, it's not a good one.

This is different than U.S. buying Alaska from Russia. There's only one Alaska, if U.S. has it then no-one else has it.

Bitcoin was designed to have the same scarcity as land. There's only 21 million bitcoins and if you buy 5 of them today, no one else will own those 5 until you sell them.

If you believe that Bitcoin will become the largest "store of value" asset class that any person, company or country buying Bitcoin today will benefit compared to people / companies / countries that do no buy Bitcoin today.

Is such belief speculative? Of course it is. Buying Alaska from Russia was also speculative purchases. Not everyone thought it was a good deal and no-one knew it has gold and oil.

Is there strategic benefit to U.S. to owning scarce financial asset?

Well, U.S. does benefits from dollar's status as world's reserve currency. If Bitcoin does become planetary store of value and planetary currency, it's better for U.S. to own larger part of it than China or Russia or Iran.

We have a gold reserve...

I love it when my government apes into things.

You can't have stablecoins, smart contracts, and an entire crypto economy on Bitcoin alone. Trump said crypto capital. I'm personally expecting grocery stores to start showing you a QR code for stablecoin payment over your preferred chain next year.

The same argument applies to gold i.e. governments and central banks buying gold is just like a hedge fund making bets while paying off gold retail holders with taxpayer money.

This is Status Quo Bias.

If you accept that Bitcoin, like gold, is a hedge against devaluing currency, then it makes sense for China or US to stock up on Bitcoin just like they stock up on gold.

Unlike gold, Bitcoin has a non-zero chance to supplant (or at least become a viable alternative to) US dollar as a global currency. In which case it's strategic for a country to own as much of such asset as possible.

If government spends $100, did that $100 came from taxes or from selling bonds (which you call "debt").

I object to calling it "debt" because you can't tell. And my greater point was that buying a liquid asset is neutral to, let's call it, "net worth" of country.

The government does "speculate" on gold. That is the closest equivalent. Gold is a hedge against declining value of a dollar, just as Bitcoin would be.

In that vein the actual order never uses the phrase 'reserve' only stockpile. I'm not sure it would rule it out though you could start it with the existing assets and then actively manage it like a reserve.

https://www.whitehouse.gov/presidential-actions/2025/01/stre...

It's like money, but better, and it can't have its value destroyed by the government through the insidious process of inflation.

Today the most common use is is as a store of value.

If you have excess cash, be it $100 or $1 million and keep it in dollars, you'll loose ~8% a year, which is the historical yearly rate of US money printing which is the real inflation (not the fake 2%; check the inflation of health care plans, college education or housing).

To preserve that value you can do simple / safe (bank savings account rate, bonds, S&P 500 etc.) and underperform that 8%.

If you want to match / outperform that 8% (i.e. not loose money over time) you have to become a successful (better than average) stock investor or invest in real estate with all the hassles it involves (like managing tenants).

Or you can invest in Bitcoin, which, historically, over 4 years, outperforms dollars, gold, us stocks.

Bitcoin outperforms dollars because US can (and does) print as many dollars as it wants, whenever it wants. Bitcoin has a fixed limit of 21 million bitcoins. You can't print more bitcoin than that therefore you can't devalue bitcoin.

It's even worse in countries like Niger or Argentina because they print even more money than US, causing even greater inflation, making it ever more important to park assets in non-inflationary asset.

If you self custody bitcoin, you remove the risk your money will get confiscated by the government or bank.

In some countries you can already pay directly in Bitcoin.

In US you can use Strike to basically store you net worth in Bitcoin and convert to cash (dollars) to pay for stuff.

Is it really larceny if there's no one to prosecute it, though?

You may be right, but I think China specifically has learned something from Russia.

Before invading Ukraine, Russia held assets across the world and they were frozen (some of it USD).

Now imagine you are a large holder of US treasuries, would you take some off the table and purchase this other asset (gold) that can ensure you're less susceptible to your enemies sanctions?

Additionally, the proposed currency for BRICS is going to be partially backed by gold, assuming they still go ahead with it even with the threat of Trump's tarriffs.

Transaction fees currently make up a tiny sliver of the mining rewards, and this seems likely to be even more the case the more ways there are to exchange it off chain (like trading ETFs). https://mempool.space/graphs/mining/block-fees-subsidy

They'll just say that these are all good things because they're political enemies who should be targeted anyway. I mean, Melania Trump? Russia? Obviously we should weaponize the financial system to target people that we don't like, and vehemently oppose any system that might threaten our ability to do that.