Can anyone who is pro-crypto (particularly: btc, eth) make the steelman argument for why a "strategic reserve" is necessary for these cryptocurrencies? Or even beneficial? I've been involved in the industry in various ways for years and I fundamentally don't understand why the government owning a lot of btc/eth is advantageous. I understand the "reserve" part, but I don't understand the "strategic."
I'm open to the idea that this could be both a good idea and a way to line insiders' pockets with US taxpayer money, but it really just looks like the latter to me.
(I've been able to come up with a few theories but they all involve the complete destruction of value of the US dollar, and I don't understand how that would be net good for America.)
The purpose is to have a bag-holder with deep enough pockets to absorb any selling pressure by the whales who own substantial crypto holdings. That's it. That's the whole reason.
The best case is an argument similar to the reason the US gold reserve exists. While the gold no longer directly backs the currency, gold is a neutral asset and wouldn't go to zero during wars/depressions, so could be sold strategically if needed to fund government in a dire situation.
The claim is that BTC is also a neutral asset, meaning it's not linked to any one government or economy, and it has certain properties similar to gold. And that the US should not let China or other countries stockpile this reserve asset first.
It's obviously not "necessary" for any government to function, but the claim is that the reserve properties would be strategically beneficial to weather the worldwide crises in the coming decades.
Absolute sovereignty is the important detail that brings the strategic reserve argument into complete focus. There are many types of wealth but none of them offer the level of freedom against censorship and external interference that bitcoin does. In an increasingly multipolar world bitcoin offers the greatest degree of self sovereignty for individuals and nations alike.
- its supply is actually limited (unlike gold, which is near-infinite in the universe). Most of it has been mined. Its supply will actually diminish over time, as keys get lost forever, though it's hard to tell how fast that process is.
If you are at a war where your whole electric grid and internet and SMS are completely down, you have much bigger problems than currency not working.
It means your bank accounts are gone, your credit cards are gone.
And how are you actually going to use gold as currency? Walk into a shop and shave off some gold at the checkout? And how will the store owner authenticate that it's actually gold?
Bullets will be a better currency than gold in that scenario.
Gold is similarly useless when it's heavy and hard to move. There is little chance of that, and Bitcoin offers advantages in ease of transfer, transparency of transactions, and lack of government interference.
Steelman is a bit of a stretch on this move. It sounds to me like the government is seeding doubt in its own reserve currency and propping up a different currency. The only sane thing I can think of is that it's a hedge against a complete loss of faith in the dollar. But then the case would have to be made for this over going back to gold.
I am pro crypto and I absolutely could not steelman this.
Well let me put it this way.
From the perspective of crypto, crypto doesn't need the government. Honestly, the way eth has been running since the move to PoS, sort of operates with a reserve already. Crypto the technology, crypto the ecosystem does not need this. Its kind of stupid and as the article makes out, would have cypherpunks rolling in graves, unless the US goes the whole hog and converts entirely to crypto (so we can publicly audit bank holdings etc, and the government cant issue money) but that's unlikely. Honestly, adoption should be driven by making crypto more accessible without compromising security, and nothing else.
From the perspective of the government, it might make sense to have a reserve if they were going to do some kind of integration/development of crypto technology. Even if it was just to bring a wafer of stability to the platform while they participate.
However, the people that this benefits the most are the traders, so my cynicism is very high here. What shits me the most is that this brings honest to god sovereign risk to a sector thats meant to be asovereign. What if the next president dumps it all at a loss?
I can almost guarantee you most everyone who owns BTC will be 100% in favor of anything that will drive up it's price, because they falsely equate it's price as it's value. It has zero value despite it's price, just like beanie babies and Tulips always did.
While I completely agree crypto is full of shysters and most likely crypto has zero intrinsic value, as well the current administration tries to enrich itself through crypto, I disagree that recent change in prices after announcement proves it is a scam. Because if the government would have announced a strategic reserve in maple syrup, the syrup futures would have increased in price drastically as well.
Strategic reserves for actual physical commodities makes some sense. Then can reduce the volatility in markets due to sudden unexpected market shocks. In the case of maple syrup that might mean a stretch of really bad harvests.
But digital currency is made up. It isn't 'needed' for anything. So there is no sense to have a strategic reserve.
Oh yeah agreed that the change in prices doesn't prove it's a scam, my thought was more along the lines of - when crypto insiders who have been talking up crypto as valuable/important because it's independent of the government quickly change their tune and cheer on government intervention when it goes into their pockets, it makes it pretty clear what the dynamic actually is.
USD is used and is useful for transacting — especially in global markets — because of its high trading volume, stability, limited/no capital flow restrictions, federal reserve’s monetary policy to favor neither exporting or importing (meaning they will not chose to intentionally deflate or inflate the dollar’s value to favor/disfavor certain industries), and also USD’s global acceptance.
On the other hand, people don’t usually transact with BitCoin because of its volatility and because BitCoin’s currency deflation. I’m also almost certain Bitcoin protocols couldn’t keep up with global transactions even if the currency did stabilize. One last point (there are way too many to write them all here) is that there will be no incentive for people to verify blocks when all 21 billion coins are completely mined.
Bitcoin is a game of betting there is a bigger sucker who comes after you. Bitcoin whales realized that the government is the biggest sucker of them all. It’s ironic to me that they have lobbied so hard for the government to subsidize their assets when they have been preaching libertarian idolatry for years.
We are coming to the end of the era where you could avoid major exposure to crypto speculation by simply not "investing" in it. When the government and major banks and top S&P500 companies are putting their money in crypto, just imagine the damage the next bubble pop will inevitably cause.
I have a theory that the volatility we have seen in crypto historically is due to the influence that speculators have in the price of the asset given the % of speculator vs non-speculator money sunk into BTC
As more and more "non-speculator" money enters BTC, the swings in the price will decrease. I see the "rainbow chart" as a backing to this theory. It shows how the price has been slowly settling . In 25 years we should have a very stable deflating BTC price.
Exactly. People forget that btc is still in price discovery. A brand new global monetary standard isn't priced by edict, the market must figure it out. Of course it's volatile, if it were smooth/predictable then this predictability would be exploited by traders and it would cease being predictable.
The fact that scammers, fraudsters, Ponzi schemers and extortion racketeers have run trillions of dollars of swindles using US dollars is not evidence that the US dollar is a scam, a fraud, a Ponzi scheme or an extortion racket.
I'm fine with crypto for transactions, but I'm not fine with my government using our money to pick winners and losers, conflicts of interest, emoluments, or artificially propping up what are likely bubbles and pyramid schemes.
For the sake of argument, let's imagine a scenario in which, someday, a ridiculously, blatantly corrupt person became President. And Congress was aware, but had controlling majorities that, one way or another, were aligned with this situation. And the Supreme Court had already been started to be stacked by the same person. And various agencies under Executive branch, which might normally be able to push back, were being systematically gutted, and otherwise intimidated, including blatant reprisal against law enforcement officers for even investigating some past corruption case. And let's imagine that some oligarchs bought up a lot of Fourth Estate, and most of the rest of the Fourth Estate was decimated by other oligarch "disruptive tech", and tech oligarchs also control much of the remaining grassroots channels of communication. And lets imagine that, partly due to media manipulation by the oligarchs, the majority of the electorate, of all parties, had forgotten everything that they ever learned in Civics class.
In this totally hypothetical situation-- but please bear with me, and imagine, for the sake of this fun intellectual exercise, that someday this could somehow happen in the US, in theory...
What remaining US gov't checks and balances would there be? How could that corruption scenario be thwarted?
(For example, is there a way for a minority in Congress to successfully bring charges? Does the FBI or some other agency have powers to investigate and intervene, below the radar? Does Judicial have any power to intervene, perhaps if petitioned? Do states have rights to contest the situation? What if there is also a treason angle; does that activate powers from anywhere else in the government to intervene?)
If this scenario was discussed in Civics class, it flew right over my head at the time, but now seems interesting.
Better yet, why not AMERICAN tax payers. I (non American) would be extremely happy for trump to pump BTC price so that I can sell my crypto at a 50x win. Thanks !
If tax dollars are ever used to buy cryptos, that's simply a transfer of wealth to the crypto sellers, in exchange for nothing in return. This is just another "Tax and Waste" policy. It's just money taken from one group just to give to some other group. It's immoral and illegal, because the gov't is not an investment bank.
Or nuclear stockpile maintenance, firefighters, or clean water. Who needs that shit anyhow when everyone has their own private firefighters, goons, and water filtration?
Long answer: no, oil is needed for the functioning of our society. Helping smooth price volatility is useful and valuable. On the other hand, BTC is not needed for our society to function, and so there is little to no value in managing prices of it. This appears to be an attempt to hedge against the collapse in the trust in the dollar.
> This appears to be an attempt to hedge against the collapse in the trust in the dollar.
Or maybe an attempt to accelerate a reduction of trust in the dollar? Any cryptocurrency in the strategic reserve is being purchase with dollars, which increases the number of dollars in circulation, and will also be directly inflationary (if it’s newly issued dollars) or increases the US debt (if those dollars are obtained by issuing debt, which classical macroeconomic theory suggests is also inflationary).
That depends on whether there’s a use for oil aside from as a tradable commodity, and additionally on whether there are scenarios in which we might need it for that potential use case in quantities that exceed our ability to easily acquire it.
Can anyone who is pro-crypto (particularly: btc, eth) make the steelman argument for why a "strategic reserve" is necessary for these cryptocurrencies? Or even beneficial? I've been involved in the industry in various ways for years and I fundamentally don't understand why the government owning a lot of btc/eth is advantageous. I understand the "reserve" part, but I don't understand the "strategic."
I'm open to the idea that this could be both a good idea and a way to line insiders' pockets with US taxpayer money, but it really just looks like the latter to me.
(I've been able to come up with a few theories but they all involve the complete destruction of value of the US dollar, and I don't understand how that would be net good for America.)
The purpose is to have a bag-holder with deep enough pockets to absorb any selling pressure by the whales who own substantial crypto holdings. That's it. That's the whole reason.
Isn’t that provided by satoshi, the dead and those who lost their hard drives?
The best case is an argument similar to the reason the US gold reserve exists. While the gold no longer directly backs the currency, gold is a neutral asset and wouldn't go to zero during wars/depressions, so could be sold strategically if needed to fund government in a dire situation.
The claim is that BTC is also a neutral asset, meaning it's not linked to any one government or economy, and it has certain properties similar to gold. And that the US should not let China or other countries stockpile this reserve asset first.
It's obviously not "necessary" for any government to function, but the claim is that the reserve properties would be strategically beneficial to weather the worldwide crises in the coming decades.
That's the best argument I've heard, thank you. I disagree with aspects of this argument but it at least makes some sense to me.
Absolute sovereignty is the important detail that brings the strategic reserve argument into complete focus. There are many types of wealth but none of them offer the level of freedom against censorship and external interference that bitcoin does. In an increasingly multipolar world bitcoin offers the greatest degree of self sovereignty for individuals and nations alike.
BTC is better than gold in many regards.
- impossible to counterfeit
- trivial to audit
- easy to transfer
- easier to store
- its supply is actually limited (unlike gold, which is near-infinite in the universe). Most of it has been mined. Its supply will actually diminish over time, as keys get lost forever, though it's hard to tell how fast that process is.
And completely worthless in the event of war with attacks on power grids electronics etc. Gold on the other hand, I could trade for food.
If you are at a war where your whole electric grid and internet and SMS are completely down, you have much bigger problems than currency not working.
It means your bank accounts are gone, your credit cards are gone.
And how are you actually going to use gold as currency? Walk into a shop and shave off some gold at the checkout? And how will the store owner authenticate that it's actually gold?
Bullets will be a better currency than gold in that scenario.
Gold is similarly useless when it's heavy and hard to move. There is little chance of that, and Bitcoin offers advantages in ease of transfer, transparency of transactions, and lack of government interference.
Steelman is a bit of a stretch on this move. It sounds to me like the government is seeding doubt in its own reserve currency and propping up a different currency. The only sane thing I can think of is that it's a hedge against a complete loss of faith in the dollar. But then the case would have to be made for this over going back to gold.
I am pro crypto and I absolutely could not steelman this.
Well let me put it this way.
From the perspective of crypto, crypto doesn't need the government. Honestly, the way eth has been running since the move to PoS, sort of operates with a reserve already. Crypto the technology, crypto the ecosystem does not need this. Its kind of stupid and as the article makes out, would have cypherpunks rolling in graves, unless the US goes the whole hog and converts entirely to crypto (so we can publicly audit bank holdings etc, and the government cant issue money) but that's unlikely. Honestly, adoption should be driven by making crypto more accessible without compromising security, and nothing else.
From the perspective of the government, it might make sense to have a reserve if they were going to do some kind of integration/development of crypto technology. Even if it was just to bring a wafer of stability to the platform while they participate.
However, the people that this benefits the most are the traders, so my cynicism is very high here. What shits me the most is that this brings honest to god sovereign risk to a sector thats meant to be asovereign. What if the next president dumps it all at a loss?
I've been wondering about Gresham's Law with respect to dollars and crypto. Which one will drive out the other?
I can almost guarantee you most everyone who owns BTC will be 100% in favor of anything that will drive up it's price, because they falsely equate it's price as it's value. It has zero value despite it's price, just like beanie babies and Tulips always did.
You're wrong — I own BTC and believe in the value of cryptocurrencies, but I am opposed to the US government doing this with my tax dollars.
I'm still correct, because I said "most".
How are you defining value here?
Everything that hodls it's desirability even after a grid-down scenario.
In such a scenario you wouldn't be able to use fiat either. Guns and food would be of greatest value. Maybe we should just reserve guns and ammo?
I also own some and am very suspicious and a bit nervous that USA is getting in on it. Especially with the current administration.
While I completely agree crypto is full of shysters and most likely crypto has zero intrinsic value, as well the current administration tries to enrich itself through crypto, I disagree that recent change in prices after announcement proves it is a scam. Because if the government would have announced a strategic reserve in maple syrup, the syrup futures would have increased in price drastically as well.
Was curious if a maple reserve existed. looks like Canada is leading the charge on that one: https://ppaq.ca/en/sale-purchase-maple-syrup/worlds-only-res...
Strategic reserves for actual physical commodities makes some sense. Then can reduce the volatility in markets due to sudden unexpected market shocks. In the case of maple syrup that might mean a stretch of really bad harvests.
But digital currency is made up. It isn't 'needed' for anything. So there is no sense to have a strategic reserve.
> there is no sense to have a strategic reserve
FX reserves. (Doesn’t apply here. But stockpiling social constructs can still make sense.)
I think the closet example here would be if the Federal Government had started a "beanie babies" strategic reserve back in the 90s.
All currency is made up, and even physical reserves (gold) have very little intrinsic value. Bitcoin is just another one.
Yes, this is true. The federal government already has the US dollar. It does not need "another one". Why would it?
Famously subject of the biggest heist in Canadian history: https://en.wikipedia.org/wiki/Great_Canadian_Maple_Syrup_Hei...
Oh yeah agreed that the change in prices doesn't prove it's a scam, my thought was more along the lines of - when crypto insiders who have been talking up crypto as valuable/important because it's independent of the government quickly change their tune and cheer on government intervention when it goes into their pockets, it makes it pretty clear what the dynamic actually is.
Intrinsic vale is not a prerequisite for utility. USD has no intrinsic value. Yes, you can pay your taxes with it. That is a contingent value.
The only intrinsic value of crypto is that it can not be unilaterally inflated away, and can be difficult to digitally seize.
In this respect it is similar to gold. It lacks the physical uses of gold, but is easier to transport.
No, I don't think the US government should invest in it. It should make sure it's own currency retains value.
> crypto has zero intrinsic value
So do fiat currencies.
USD is used and is useful for transacting — especially in global markets — because of its high trading volume, stability, limited/no capital flow restrictions, federal reserve’s monetary policy to favor neither exporting or importing (meaning they will not chose to intentionally deflate or inflate the dollar’s value to favor/disfavor certain industries), and also USD’s global acceptance.
On the other hand, people don’t usually transact with BitCoin because of its volatility and because BitCoin’s currency deflation. I’m also almost certain Bitcoin protocols couldn’t keep up with global transactions even if the currency did stabilize. One last point (there are way too many to write them all here) is that there will be no incentive for people to verify blocks when all 21 billion coins are completely mined.
Bitcoin is a game of betting there is a bigger sucker who comes after you. Bitcoin whales realized that the government is the biggest sucker of them all. It’s ironic to me that they have lobbied so hard for the government to subsidize their assets when they have been preaching libertarian idolatry for years.
You need fiat to pay your taxes.
or go to jail :)
I'm assuming that next, the US will invest in a "Strategic Tesla stock reserve."
I would not be opposed to the Federal Reserve buying VTI and distributing the dividends as UBI.
We are coming to the end of the era where you could avoid major exposure to crypto speculation by simply not "investing" in it. When the government and major banks and top S&P500 companies are putting their money in crypto, just imagine the damage the next bubble pop will inevitably cause.
I have a theory that the volatility we have seen in crypto historically is due to the influence that speculators have in the price of the asset given the % of speculator vs non-speculator money sunk into BTC
As more and more "non-speculator" money enters BTC, the swings in the price will decrease. I see the "rainbow chart" as a backing to this theory. It shows how the price has been slowly settling . In 25 years we should have a very stable deflating BTC price.
Exactly. People forget that btc is still in price discovery. A brand new global monetary standard isn't priced by edict, the market must figure it out. Of course it's volatile, if it were smooth/predictable then this predictability would be exploited by traders and it would cease being predictable.
The fact that scammers, fraudsters, Ponzi schemers and extortion racketeers have run trillions of dollars of swindles using US dollars is not evidence that the US dollar is a scam, a fraud, a Ponzi scheme or an extortion racket.
What percentage of USD transaction volume is made up of scams, fraud, Ponzi schemes, and extortion rackets? What percentage of BTC?
Not at all similar.
I'm fine with crypto for transactions, but I'm not fine with my government using our money to pick winners and losers, conflicts of interest, emoluments, or artificially propping up what are likely bubbles and pyramid schemes.
Incredible conflict of interest here.
And probably emoluments too.
Bigger picture, a genuine curious question:
For the sake of argument, let's imagine a scenario in which, someday, a ridiculously, blatantly corrupt person became President. And Congress was aware, but had controlling majorities that, one way or another, were aligned with this situation. And the Supreme Court had already been started to be stacked by the same person. And various agencies under Executive branch, which might normally be able to push back, were being systematically gutted, and otherwise intimidated, including blatant reprisal against law enforcement officers for even investigating some past corruption case. And let's imagine that some oligarchs bought up a lot of Fourth Estate, and most of the rest of the Fourth Estate was decimated by other oligarch "disruptive tech", and tech oligarchs also control much of the remaining grassroots channels of communication. And lets imagine that, partly due to media manipulation by the oligarchs, the majority of the electorate, of all parties, had forgotten everything that they ever learned in Civics class.
In this totally hypothetical situation-- but please bear with me, and imagine, for the sake of this fun intellectual exercise, that someday this could somehow happen in the US, in theory...
What remaining US gov't checks and balances would there be? How could that corruption scenario be thwarted?
(For example, is there a way for a minority in Congress to successfully bring charges? Does the FBI or some other agency have powers to investigate and intervene, below the radar? Does Judicial have any power to intervene, perhaps if petitioned? Do states have rights to contest the situation? What if there is also a treason angle; does that activate powers from anywhere else in the government to intervene?)
If this scenario was discussed in Civics class, it flew right over my head at the time, but now seems interesting.
Well, somebody has to HODL the bag at the end. Why not the taxpayers?
Better yet, why not AMERICAN tax payers. I (non American) would be extremely happy for trump to pump BTC price so that I can sell my crypto at a 50x win. Thanks !
It's my understanding that the prevailing pro-crypto view is that it's a store of value not a payment system.
That's the sucker view. It's only useful for transactions because it's too risky to hold.
I hold crypto, mostly BTC, and think this is just another grabby move by the Trump administration that will ultimately harm crypto.
If tax dollars are ever used to buy cryptos, that's simply a transfer of wealth to the crypto sellers, in exchange for nothing in return. This is just another "Tax and Waste" policy. It's just money taken from one group just to give to some other group. It's immoral and illegal, because the gov't is not an investment bank.
On the bright side we're no longer wasting money on shit people don't need like weather prediction.
Or nuclear stockpile maintenance, firefighters, or clean water. Who needs that shit anyhow when everyone has their own private firefighters, goons, and water filtration?
/s
Would you agree that the Strategic Oil Reserve has exactly the same qualities?
Short answer: no.
Long answer: no, oil is needed for the functioning of our society. Helping smooth price volatility is useful and valuable. On the other hand, BTC is not needed for our society to function, and so there is little to no value in managing prices of it. This appears to be an attempt to hedge against the collapse in the trust in the dollar.
> This appears to be an attempt to hedge against the collapse in the trust in the dollar.
Or maybe an attempt to accelerate a reduction of trust in the dollar? Any cryptocurrency in the strategic reserve is being purchase with dollars, which increases the number of dollars in circulation, and will also be directly inflationary (if it’s newly issued dollars) or increases the US debt (if those dollars are obtained by issuing debt, which classical macroeconomic theory suggests is also inflationary).
That depends on whether there’s a use for oil aside from as a tradable commodity, and additionally on whether there are scenarios in which we might need it for that potential use case in quantities that exceed our ability to easily acquire it.
I dunno, can you fill your tank up with bitcoin when you need to get to work?
Do EMPs destroy the ability to use and exchange oil?
Oil is notably necessary to keep the united states military operational (in addition to the uses in other comments).
that’s not “in exchange for nothing”, its in exchange for oil. not terribly complicated.
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