I've been focusing on the election recently and have had no motivation to update. Now that the outcome is clear, I will immediately present a lengthy article.
From today onwards, Trump will become the most powerful president since Little Roosevelt. It was during Little Roosevelt's term that Fort Knox became the base for America's gold strategic reserves, and Trump has also declared his intention to make Bitcoin the federal reserve currency of the U.S.
In this U.S. election, Trump defeated Harris in the popular vote. As long as the electors are loyal to the will of the voters, Trump has already secured more than half of the 538 electoral votes. Unless something unexpected happens, on January 6, 2025, Trump can return to his loyal White House.
Furthermore, the Republican Party in the Senate has already occupied 51 seats, and the two parties in the House are expected to form a balance. Even if the Republicans cannot control it, the margin between the two sides is within single digits. Moreover, thanks to Trump's multiple nominations of Supreme Court justices during his first term, the ratio of conservative vs. liberal justices in the Supreme Court is currently stable at 6:3, surpassing even President Little Roosevelt, who did not fully control the Supreme Court.
The last occurrence of two non-consecutive elections dates back to 132 years ago in the Cleveland era. After November 5, Wikipedia's page needs to be updated; Trump's achievement as the second historical figure has been accomplished.
Reflecting on the development history of Rome, the Republican Party has become Trump's party. The first unification of the three branches also gives him a power base that previous U.S. presidents did not have. The last time Little Roosevelt established the alliance of the dollar and gold lasted until the Bretton Woods system collapsed. Will Bitcoin also open this historical process this time?
The institutionalization process of Web3 has begun.
The system in Eastern powers signifies stability, while in the eyes of Western powers like Trump and Musk, the System and Deep State represent decayed interest groups that need to be eliminated. This is why Musk personally gets involved, hoping to become the helmsman of the Department of Government Efficiency (D.O.G.E), adding new catfish and vitality outside the existing political correction mechanisms.
This is not a new idea; the birth of the FBI, the emergence of the IRS, and the establishment of the CIA are all new variables that cannot be maintained by existing routes. Therefore, it is unnecessary to believe that cryptocurrencies and Bitcoin will truly change America. What we need to focus on is how the dollar and gold are being 'Americanized,' which is also known as institutionalization, where the emerging resistance is absorbed as part of the existing ruling order.
The end of free dollars
The issuance of the dollar has roughly gone through three stages: from the Continental currency during the Revolutionary War to the establishment of the Federal Reserve in 1913, from the gold standard between 1879 and 1944, to the era of fiat currency after the 1970s.
As early as the American Revolutionary War, the Continental Army began issuing dollars, but at that time, dollars were more of a war bond. If you bet on the Continental Army winning, just hoard dollars. Later, during the Civil War, the federal government issued a large amount of 'greenback dollars,' which also had a strong war bond character, while the southern government issued cotton bonds. Ultimately, the industrialized dollar triumphed over the plantation owners' cotton.
Then came the Bretton Woods system associated with World War II, where the dollar was linked to gold, and other countries' currencies were linked to the dollar. The dual peg mechanism was effectively a gold standard mechanism, but after Nixon announced that gold would no longer be convertible to dollars, that system officially collapsed.
The above outlines the history of the dollar as we know it, while today's dollar is actually a voucher for U.S. Treasury bonds. The U.S. Treasury issues bonds, which the Federal Reserve purchases and then issues as dollar reserve currency. The dual-currency mechanisms like Luna-UST are merely poor imitations.
The era of the greenback dollar during the free banking period between the 1820s and the Civil War is no different from the current prosperity of cryptocurrencies. A large number of banks could issue banknotes on their own, essentially a promissory note redeemable on demand. Even if the face value of the banknotes issued by various banks was the same, there were still situations where they could not be exchanged. In the most frenzied times, there were once over 70,000 different types of 'dollars' in circulation.
To a considerable extent, the chaos of the dollar system was also one of the causes of the Civil War.
The chaos of such issuers cannot naturally exist, just as today's regulatory approach to cryptocurrencies shows that without management, even gold could be sold at prices ranging from the moon to the underworld, keeping the economic system under a long-term Brownian framework.
Accordingly, the United States enacted the National Banking Act in 1863, establishing a number of national banks and the Office of the Comptroller of the Currency (OCC). However, it is important to note that the U.S. government did not deny the qualification of other banks to issue banknotes; rather, it conducted targeted 'review' and supervision, similar to how the SEC reviews the 'securities issuance' qualifications of various cryptocurrencies. This does not deny your qualifications for cryptocurrency issuance; the characteristics of U.S. regulation are hidden in history.
At this point, the U.S. government began large-scale intervention in the dollar until the economic crisis of 1907, where J.P. Morgan played the role of a savior, thus gaining hard power to collaborate with the U.S. government. In 1913, the Federal Reserve Act was passed, and the Federal Reserve (Fed) was thus born, completely ending the era of free dollars.
Bitcoin after going ashore
Zhang Hua was admitted to Peking University, Li Ping entered a technical school, and I worked as a sales assistant in a department store. We all have bright futures.
There are only two types of cryptocurrencies in the world: Bitcoin and others. In Trump's view, the dollar needs to change its anchor, and Bitcoin would be a better anchor than U.S. debt, as it can at least be one of the supports like gold. The only problem is that Bitcoin's price cannot accommodate tens of trillions of liquidity. If each Bitcoin is worth a million dollars, it is more likely that the dollar will depreciate.
Let's do a simple math problem. The current U.S. debt scale is 35 trillion dollars, while the current circulating Bitcoin supply is about 19.1 million. A simple division shows that to solve the U.S. debt crisis, the price of a single Bitcoin needs to reach 1,832,460 dollars, meaning the current 75,000 dollars is merely an appetizer, with a potential increase of 24 times.
A more rational choice is that Bitcoin does not need to become the reserve currency of the dollar like gold; it only needs to resolve the interest on U.S. debt. According to estimates, the annual interest on U.S. debt is around 1 trillion dollars, which is roughly half of the cryptocurrency market value or about equal to Bitcoin's market value. However, this still requires the U.S. government to control all or most of Bitcoin. Regardless of whether the U.S. government can achieve this, assets without liquidity are worthless.
Image description: Bitcoin distribution map. Image source: River Capital.
Currently, the U.S. government's holdings of Bitcoin are around 1%, but similar to how J.P. Morgan relates to the Federal Reserve, most BTC ETFs have a U.S. background. If we account for their 5.2% share, plus Satoshi Nakamoto's passive lock-up of 4.6%, then theoretically, the U.S. government is capable of controlling or influencing about 10% of Bitcoin's price, which already qualifies as a super whale.
Before 2034, there will be about 10 trillion dollars in interest on U.S. debt. Considering that Trump's term only lasts four years, if Bitcoin can truly serve as a dollar reserve, then it only needs to resolve about 5 trillion dollars in interest. Therefore, the price of a single Bitcoin would need to reach 261,780 dollars, which is about three times the current price. This is achievable as long as one adopts an attitude of 'let the flood come after I die.'
The entire Web3 will then enter the American era; the last internet dividend bore the fruits of Silicon Valley, and this time it is uncertain how it will unfold.
