In fact, Trump gave an impassioned speech at the Bitcoin Conference in July this year, saying, "If I return to the White House, I will make the United States the global capital of cryptocurrency." Trump promised to establish a special monetary advisory committee for Bitcoin, order the Treasury Department and other federal agencies to stop developing the central bank's official digital dollar, and immediately fire the current chairman of the U.S. Securities and Exchange Commission, Gensler, because he is very unfriendly to Bitcoin. Gensler is also very tactful and has announced that he will resign as chairman of the SEC on January 20.
This news boosted the confidence of people in the cryptocurrency world. More importantly, Trump also promised that the United States would use Bitcoin as a strategic reserve asset and would never sell it off. This was the most favorable stimulus. Trump cashed in millions of dollars of campaign funds from the cryptocurrency world on the spot with his impassioned speech at the Bitcoin Conference.
Gensler, Chairman of the Securities and Exchange Commission
Strategic reserve assets
In fact, Trump called Bitcoin a scam in 2021, and believed that Bitcoin was in competition with the US dollar. It was another currency and directly competed with the US dollar. Three years later, Trump made a 180-degree turn and changed his attitude, saying that Bitcoin is not a threat to the US dollar.
What is Trump's real idea? Is he fooling everyone, or does he really think that Bitcoin should be used as a strategic reserve asset for the United States?
If it is really decided to use Bitcoin as an important reserve asset for the issuance of the US dollar, it is equivalent to Trump's determination to completely overthrow the most important foundation for the survival of the American establishment and destroy its monetary system. Maybe Trump is just a stopgap measure to get some funds for the election. This is also possible. Now that Trump has been elected, how can he fulfill his promise to use Bitcoin as a strategic reserve asset? Should he continue to do this campaign promise? If Trump really wants to do it, there are only two ways.
The first method is to order the Federal Reserve to treat Bitcoin as a monetary reserve asset, just like U.S. Treasury bonds. This is equivalent to the Federal Reserve directly printing dollars to buy Bitcoin in the market, treating Bitcoin as an asset and giving money to others. This means that Bitcoin has the same status as U.S. Treasury bonds, and both become collateral assets for the issuance of U.S. dollars, or the currency anchor of the U.S. dollar.
This question depends on whether Federal Reserve Chairman Powell agrees. Judging from the current situation, there is no chance. The relationship between the two is very antagonistic, which means that Powell is unlikely to follow Trump's instructions and do whatever he says.
Can Trump wait for Powell to step down and then replace him with his own person as the chairman of the Federal Reserve? You know, the decision-making power of the Federal Reserve chairmanship actually lies with Wall Street rather than Trump. The president can nominate but it does not mean that Congress agrees, and Congress will ultimately listen to campaign investors. So as long as Wall Street disagrees, no matter how many candidates you nominate, it will be nothing. None of them will pass.
Why doesn’t Wall Street agree? If Bitcoin is used as a collateral asset for the US dollar and is comparable to national debt, this actually subverts the issuance mechanism of the US dollar. It is equivalent to Trump directly uprooting the interest system that has been maintained for more than 150 years by the big families behind Wall Street. Wall Street will not allow Trump to do this.
The financial tycoons behind Wall Street
The right to issue the US dollar currency can influence the fate of everyone in the United States, the world, and mankind. Can such a great power be handed over to you casually? So no matter what Trump thinks, who he wants to arrange for the position of Federal Reserve Chairman, as long as Wall Street does not agree, this person will definitely not be appointed. This shows a problem. The person Trump finally chooses must be someone accepted by Wall Street, otherwise it will not pass the Congress, and then this person will not betray the interests of Wall Street.
In short, Trump wants to use Bitcoin as a currency reserve asset for the US dollar, which is impossible and the first path does not work.
The second way is for the U.S. Treasury to spend money to buy Bitcoin in the market as a strategic asset of the Treasury. This is possible, just like the U.S. Department of Energy building a national strategic oil reserve. This is a concept. I can reserve strategic oil and strategic metals. Similarly, I can also reserve strategic Bitcoin.
The key now is where the money comes from? The biggest problem facing the U.S. Treasury is the huge deficit. The latest report of the Federal Reserve once again emphasized that among all financial risks, inflation is no longer the first, and the biggest risk is debt, because the U.S. national debt has soared to 36 trillion, and the deficit next year may be even higher.
It would be fine if the U.S. Treasury Department spent tens of billions of dollars to buy Bitcoin, but if it used hundreds of billions of dollars to build a huge Bitcoin reserve, this would significantly increase the fiscal deficit, and Congress would not agree.
The US President proposed a huge expense, which must be approved by the House of Representatives. Even though the Republicans have an absolute advantage in the House of Representatives, they may not listen to Trump. Based on this, Trump must think of another way to not increase the fiscal deficit and buy Bitcoin as a strategic asset on a large scale. Is there any good way?
Indeed, Republican Senator Cynthia Loomis of Wyoming has proposed a plan to complete Trump's strategic Bitcoin reserve without increasing the government deficit.
She asked the US government to buy at least 1 million bitcoins and hold them for at least 20 years. 1 million bitcoins account for about 5% of the total circulation of bitcoins, which is about $100 billion at the current price. She said that the Federal Reserve currently has 8,100 tons of gold reserves on its balance sheet, and some of the gold can be sold to buy bitcoins, which will neither increase the US national debt nor the Treasury deficit, and can use bitcoin as a strategic reserve asset.
But who actually owns the 8,100 tons of gold on the Fed's balance sheet? In fact, the ownership of the US gold reserves has always belonged to the US Treasury, not the Fed. Because the Fed is the central bank, it manages the treasury on behalf of the Treasury. The money of the national treasury is stored in the Fed, but the Fed is not its owner. Instead, it helps the Treasury manage its assets.
Theoretically, the gold that Loomis proposed for the Federal Reserve originally belonged to the U.S. Treasury Department, so as long as the Treasury Department ordered to sell gold, the Federal Reserve would execute it. And her plan of "selling gold to buy Bitcoin" would also have several benefits.
First, the Fed cannot stop it. Legally speaking, the Fed does not own gold, so it has no way to stop it. Second, the US fiscal deficit will not increase. Third, the Fed's balance sheet will not change significantly. Fourth, she believes that Bitcoin will appreciate significantly in the future, because once the US Treasury Department takes action, it will inevitably drive up the value of Bitcoin again. After the value of Bitcoin soars, it can also reduce the US fiscal deficit, which is a four-pronged advantage.
A big player in the cryptocurrency industry said that if this bill is passed, the price of Bitcoin will rise to at least $500,000 per coin. If the United States does this, it will also force the European Union and many other countries to follow suit and store Bitcoin as a currency reserve asset, causing the value of Bitcoin to rise even more.
Currently, the forecasting agency Polly market has given a 32% price target on whether the Bitcoin bill can be passed after Trump takes office on January 20.
The dollar’s “rebels”
When looking at a problem, we must look at the essence. In fact, the essence of Bitcoin and gold is exactly the same. Both are "rebels" against the US dollar. The logic behind Loomis' proposal to sell gold and buy Bitcoin is because Bitcoin is currently rising fast and gold is rising slowly.
The emergence of Bitcoin in 2009 was due to the 2008 financial crisis. At that time, some people believed that if the United States continued to do so, the entire dollar system would collapse. That’s why Satoshi Nakamoto and his gang started to develop digital currency. In other words, the reason why both gold and Bitcoin skyrocketed is because people’s trust in the dollar is getting worse and worse.
On the other hand, if the Federal Reserve consistently adheres to the monetary bottom line, insists that no one can defend the value of the currency, and opposes inflation, and never prints an extra penny during a financial crisis, then no one will invest in gold and Bitcoin, because the value of the US dollar has been maintained, and there is no need to invest in other assets.
But it is obvious that neither the Federal Reserve, the US government, the British Empire, nor France, the Netherlands and Spain have been able to defend the currency.
Since hegemony is always greedy in the end, and greed is always excessive, and excess will lead to expenditures exceeding income, the final depreciation of the US dollar is inevitable. This is a law of history, and no dynasty, no country, and no ideology can transcend this.
When the dollar depreciates to a certain extent, there will be "rebels". Gold and Bitcoin are such assets. Now, if the surge in gold will threaten the hegemony of the dollar, then the surge in Bitcoin will also threaten the hegemony of the dollar. Gold has always been under the asset item of the Federal Reserve's balance sheet. There is actually no difference in replacing gold with Bitcoin. No matter which one surges, it will increase the world's distrust of the dollar.
Under normal circumstances, this bill should be difficult to pass, but there are too many black swans in the United States right now, so let's wait and see.
