Arthur Hayes: How is the US's strategic Bitcoin reserve most feasible?

Pax Americana Make-A-Wish Corporation, based in Mar-a-Lago, hosts dozens of supplicants. Cryptocurrency types wait in line like everyone else, hoping to have one or more wishes granted. The erratic genie, The Orange Man, with his coterie of sycophants, presides over affairs in the South Florida swamps, playing 1980s pop music every week at his country nightclub.

There is no good or bad spirit; it is the recipient's wishes that should be judged. Every culture has moral stories about how misguided wishes aimed at shortcuts to success, wealth, or personal happiness can have unintended consequences. The moral of the story is that there are no easy buttons in life; all good things are the product of hard work and effort.

I intend to discuss the key wishes of many in the global crypto industry regarding the establishment of a Bitcoin Strategic Reserve (BSR) and crypto regulation under the US. Broadly speaking, many misguided crypto people want the US government to print dollars and buy Bitcoin as part of the national reserve and create regulatory moats around crypto businesses they have a financial interest in. I believe these people are asking for the wrong thing. Let's do the hard thing and ask the genie for something that the next administration, regardless of party affiliation, cannot easily undo.

In the first part of this article, I will discuss why the Bitcoin Strategic Reserve (BSR) and the Frankenstein crypto regulation bills are negative for the industry (both locally and globally). Next, I will provide advice for those who line up day after day in seersucker suits or block heels and summer dresses hoping to make a wish to the orange genie, what they should ask the orange genie to fulfill.

Bitcoin Strategic Reserve

What can be bought can be sold. The fundamental problem with governments hoarding any asset is that they buy and sell assets primarily for political gain, not financial gain. Does Bitcoin itself have any role to play for the U.S. government, given the current structure of the global economic system? No. Bitcoin is just another financial asset. While readers may think that this is the hardest currency ever created by the one true God, Satoshi Nakamoto, I can assure you that this genie is not motivated by a spiritual need to please God. He is motivated by appeasing the voter base that helped him get into office.

Let’s assume Trump is able to create a BSR. The government buys one million Bitcoins, as US Senator Lummis suggested. Boom! The price goes crazy. Then, the buying ends and the uptrend channel stops.

Fast forward two to four years. By 2026, the Democrats could be riding on voter discontent with Trump’s failure to quell inflation, stop any endless wars, fix the food supply, drain the swamp, etc. What if they get a veto-proof majority in the House? What if, by 2028, the Democrats win the election…

For an incoming Democratic-controlled legislature or president, finding a large sum of cash to buy nice things for supporters is the first directive. This is the first directive for any politician, regardless of the political system. There are a million Bitcoins sitting there, ready to be sold; all it takes is a signature on a piece of paper. The market rightfully worries about when and how these Bitcoins will be sold. Is this done to minimize the impact on the market and maximize the dollars received, or is it done maliciously to punish supporters of Orange Man crypto holders? We don’t know, but this uncertainty will limit enthusiasm for Bitcoin and the entire crypto capital market.

Creating a BSR or a national reserve of altcoins, including cryptocurrencies like Ripple, turns any government-held cryptocurrency into a powerful political weapon. Also, as a purely political ploy, will the US government meaningfully engage with the community? Will they donate to sponsor Bitcoin Core developers? Will they run nodes? Maybe… but from the way the BSR is being talked about, it seems to me like a set-it-and-forget-it exercise. Trump and the GOP can look at the sky-high price of Bitcoin, declare mission accomplished, and pitch David Bailey for more campaign donations at $10,000 a pop. Don’t hate the players, hate the game. Asking the genie to grant this wish will cause unnecessary pain in less than two years.

Frankenstein Encryption Act

The easiest way to understand what crypto regulations holders consider acceptable is to look at their portfolios. From my perspective — away from the circus surrounding the genie — it seems that those with large holdings in centralized crypto financial intermediaries are most likely to have their crypto regulatory wishes fulfilled due to the volume of noise they generate. Unfortunately, those building truly decentralized technologies and applications do not have the financial resources to play politics at this juncture in the cycle. The richest crypto bros all own an exchange, brokerage service, or some sort of lending platform.

As a result, the crypto regulatory aspirations that are likely to be realized, if at all, will come in the form of overly complex, prescriptive rules that only large and wealthy centralized companies can afford. That’s because the only people who can interpret the law will be career corporate lawyers who have been in and out of various alphabet soup regulatory agencies.

Is this what the broader crypto community really wants from the genie? Is this all about making Brian Armstrong and Larry Fink richer? I’m not a hater; they’re just doing their job…maximizing shareholder value by creating a monopoly structure that uniquely benefits their business. Maybe those readers who are shareholders of Coinbase and Blackrock want a Frankenstein crypto bill. But I believe this regulation will not change the status quo, and while it has no direct negative impact on crypto, it’s not a positive one either.

To all the global builders relocating to the US because of a supposedly crypto-friendly government, take note. If you acquiesce to this outcome, your startup is doomed to fail. Monopolies, surrounded by an impenetrable wall of red tape, are not friendly to true innovation. They use their unique privileged access to the system to kick out would-be usurpers. As a startup founder, you may fly business class to JFK, but you’ll definitely fly economy class when you leave.

make a wish

What would I wish for? I'll tell you. As is my style, to understand what I wish for, I need to review some financial history and provide my interpretation of certain events.

The big question is, why would the Genie grant my wishes or anything like that? The Genie and his lieutenants are the ones who actually run the empire, they only grant my wishes to help them achieve their goals.

The overall goal of Trump's two most important deputies, U.S. Treasury Secretary Scott Bessant and U.S. Secretary of State Marco Rubio, is to reform the global economic order to maintain the dollar and U.S. hegemony. As I briefly mentioned in my previous article "Arthur Hayes: Why BTC may fall to $70,000 before rising to $250,000", the U.S. dollar system is divided into two parts. That is, currency and reserve assets. The U.S. dollar has been a reserve currency since the Bretton Woods Agreement in 1944, but the reserve assets have changed over time.

Changes in the US dollar system's reserve assets over time:

1944-1971: Gold

During this period, the value of the dollar was fixed at $35 per ounce of gold. Certain sovereign nations that were peace allies of the United States were allowed to exchange their dollars for gold at the above price.

1971-1994: Oil

US President Richard Nixon abandoned the gold standard in order to sustain the Vietnam War and the increased social welfare programs enacted by his predecessor, US President Lyndon Johnson. The reserve asset became the petrodollar. Saudi Arabia was the first country to explicitly agree to price oil in dollars and use its dollar surplus to invest in US Treasuries. Now the Treasury could issue bonds whose bonds were primarily backed by oil flows from the largest marginal hydrocarbon producers.

1994–2025: Foreign exchange reserves of global exporters

Throughout the 1980s, the United States was able to increase oil production and make its economy more energy efficient. The rise of China and the other Asian Tigers (South Korea, Taiwan, Japan, Malaysia, Thailand, etc.) meant that the United States and Western Europe could produce goods cheaply. In 1994, China conducted a massive devaluation of the yuan and officially joined the mercantilist race to hoard as much foreign hard currency as possible through exports. These exporters were allowed to sell goods to the huge Western consumer market as long as they priced their goods in US dollars and used their dollar surpluses to buy US Treasury bonds.

2025 —?: Bitcoin/Gold

China was the world’s largest economy for much of antiquity before the European Renaissance; its stated goal is to reclaim glory for its people. Making America great again is not a uniquely American idea; the Chinese have been doing it since 1949.

To achieve this goal, China transformed itself from a low-cost, low-quality producer to a low-cost, high-quality producer. As it became clear that using its surplus to buy more and more Treasury bonds further solidified China’s position as a secondary power to the United States, the Chinese government stopped accumulating Treasury bonds. Under the old unspoken agreement, one dollar of export surplus must buy one dollar of Treasury bonds. In the past 12 months of public data, China has generated a $1 trillion export surplus but allowed its Treasury stockpile to decline by $14 billion. [1]

Other exporting countries have taken notice. Even though most trade is settled in dollars, most of the fast-growing global South trades more with China than with the United States. De-dollarization is not about abandoning the dollar itself, but about investing the surplus in assets that the US-run elites do not approve of.

This brings me to the dilemma facing Trump’s lieutenants. They need to create a new system that preserves the dollar as a currency for trade and invests in a reserve asset that allows them to maintain a well-functioning market for U.S. Treasuries. If they are really ruthless, they will devise a solution that quickly reduces the U.S. public debt to GDP ratio to around 30%, the level it was in 2000.

The world will no longer accept savings in US Treasuries. This is why a neutral reserve asset must be chosen. No country has attempted to suggest replacing the dollar with their domestically created fiat currency. This is because the Pax Americana is in decline and it is directly related to the imbalances that necessarily arise from the Empire’s role as the issuer of the reserve currency.

That’s financial history, but before I express my wishes, I want to talk about how one of the most influential TradFi money market strategists thinks the problem I described above can be solved.

DeepSeek

Zoltan Pozsar is a former Dallas Fed staffer, Credit Suisse strategist, and current blogger for the financial elite of Pax Americana. His solutions are likely to work, and I will describe them shortly. It is therefore worth discussing them, and then discussing how I diverge from his ideas. Ultimately, I think his solutions are for the 1980s, not 2025. Too many strategists who believe in American exceptionalism think that reclaiming the power and prestige of Pax Americana is like the plot of the movie Top Gun.

The recent Top Gun remake, featuring an older but still-alive Tom Cruise, could be an apt metaphor for current world relations with just a few tweaks. Replace a nearly $75 million F-18 with a $50,000 drone from Iran’s Shahed that is sold in the global south. Tom Cruise, in his 60s, is still flying these overly expensive aircraft against a swarm of AI-connected drones for a fraction of the price.

Which brings me to DeepSeek. In case you only live inside TikTok and don’t know, DeepSeek is a revolutionary AI Large Language Model (LLM) that performs as well as ChatGPT or Claude, but costs 95% less to train. It’s open source, and so far no CEO of a major tech giant like Jensen Huang (NVIDIA) or Satya Nadella (Microsoft) has said that its results and costs don’t justify.

DeepSeek is important because it was developed by a Chinese hedge fund in Hangzhou. China is under an economic blockade from the United States when it comes to high-performance semiconductors. According to American thinking, Chinese entrepreneurs should not be able to train and deploy a large language model that performs close to one trained using high-performance chips designed in the United States. The apparent success of DeepSeek shatters the illusion that "whoever invests the most can create the best-performing large language model." It is also further proof that necessity is the mother of all invention. Economic sanctions cannot stop a small team of 200 determined Chinese entrepreneurs. If the ground offensive cannot destroy China's production capacity, the era of American exceptionalism may be over. There is nothing wrong with being ordinary, unless your entire identity is wrapped up in the fictitious concept of nationality and you have a sense of superiority simply because you were born in "the United States."

When non-American elites believe they are inherently inferior, they will follow orders. This helps the American financial elites set policy, such as what currency a country uses in trade and how their national surplus is invested. If non-Americans believe they are equal, they may not give in and take orders from American diplomats. This is important to Zoltan’s policy recommendations because they are bilateral measures. Bessant says “do this,” and a country’s treasury acquiesces. If the country refuses, then nothing happens. This is the Achilles’ heel of Zoltan’s policy measures.

Zoltan’s goal is the same as mine: to devalue U.S. Treasury bonds. Furthermore, Zoltan correctly points out that the United States must extend the maturity of its debt stock and reduce the amount of interest it pays. Let’s assume that Bessant wants to reduce the debt-to-GDP ratio from 100% to 30%. If GDP remains the same, then the real value of the debt needs to fall by 70%. The overall theme of Zoltan’s various ideas is to require foreign Treasury holders to exchange short-term bonds for 100-year bonds. 100-year bonds are not tradable, but can be repurchased at par if the country needs cash. [2]

Let me explain the mechanism:

Suppose you, a country in the Global South, hold $100 worth of 10-year Treasury bonds, also with a par value of $100.

• At Bessent's request, you swap your 10-year Treasury for a zero-coupon 100-year Treasury bond (the Centennial Bond). The Centennial Bond is worth $30 and has a par value of $100. I've used some clever bond math to make this example easier to understand. A longer-term bond with no coupon income over its lifetime has a lower intrinsic value than a shorter-term bond with a coupon.

• The actual value of your debt has dropped by 70%, but its face value is still $100.

• If you are a good ally (Europe… a little dubious) or a vassal (Philippines… I think Europe belongs here), you can call the Fed and exchange the Centennial Bond for its face value in USD for free. Imagine you need to buy some oil from Saudi Arabia with USD, the Centennial Bond is actually worth $30, but the Fed will give you $100 today, with no interest.

• Any surplus dollars can only be invested in future traded Century Bonds. You may not buy anything else.

It's a good and bad deal. The bad thing is that you suffer a 70% real devaluation. You've just agreed to destroy your country's savings. Worse, you've also agreed that the only place to get liquidity for this debt is the issuer itself, not the global market. But on the other hand, if you do well, you can get an interest-free loan from the Fed.

There are a few points to point out, which overall show that this deal is not being accepted by many. For many countries, China is now their largest trading partner, not the United States. American weapons cannot be sold because they use them to arm Ukraine. Furthermore, American weapons are just intermediate products that China re-exports, so why not go directly to the source?

My wish

Can I improve on Zoltan's idea? Of course I can.

The goals remain the same: devalue existing treasuries, keep the dollar as a transaction currency, and extend the maturity of treasuries to 100 years. Another new goal is to make Bitcoin a global neutral reserve currency.

It is very important to choose what you devalue your fiat currency against. If you devalue anything that has real use, like oil or food, you risk social collapse through inflation. The devaluation must be something else that does not actually impoverish the majority of civilians.

Zoltan chooses the time of devaluation. You trade a 10-year bond for a 100-year asset. The time value of money dictates that what you get in 100 years is worth less than in 10 years. But the other party has to agree to the exchange. I think devaluation should be targeted at Bitcoin and could be done unilaterally, which would ultimately have the same effect.

My plan:

Step 1: Declaration

Bessant gave a speech announcing that the United States intends to reformulate the global reserve currency system, with the U.S. dollar as the denominated currency, but the reserve asset is Bitcoin.

Step 2: Gradual depreciation

The Treasury will bid for Bitcoin at a price in U.S. dollars above the current market price, so that over time the total market value of Bitcoin will be large enough to facilitate its role as a global reserve asset. Specifically, for Bitcoin to become as large as the Treasury bond market, the price of Bitcoin must rise to $1.8 million.

Example:

If BTCUSD = $100,000, Bessent says they will buy BTC for $200,000. The problem is that instead of providing cash USD to the seller, he is providing them with an on-chain 100-year zero-coupon bond (the Centennial Bond). He also allows anyone who provides the appropriate information about themselves to buy back the bond for cash at par value, with no interest for a year. In effect, the BTC seller gets USD, but it is in the form of a loan. The seller’s real asset is the Centennial Bond.

Market reaction:

Since Bessent buys BTC at a higher price than the spot price, arbitrage is possible. Traders can borrow USD, buy BTC spot at a price lower than the Treasury bid, sell it to the Treasury in exchange for Centennial Bonds, buy back the Centennial Bonds with USD, and then repay the loan. Since this is done on-chain, anyone in the world can trade, and BTC will quickly rise to Bessent’s bid.

criticize:

Why would BTC holders sell BTC for shitty Century Bonds? Because the price is high. This is also why people think it’s a good idea to hand over BTC to BlackRock. If the price is right, most ideals and common sense go out the window.

Step 3: Maturity of Treasury Bonds

Now, the Treasury has BTC on the asset side and Century Bonds on the liability side. The market will expect Bessent to raise its bid again and get ahead of the game. Now, the Treasury can sell its BTC for USD at a profit. Suppose the market trades at BTCUSD = $300,000, but Bessent bought BTC for $200,000. This $100,000 profit can be used to buy back the 10-year Treasury. In effect, Bessent can extend the weighted average maturity (WAM) of the Treasury bonds in one step.

Treasury bond holders are not disadvantaged because they know Bessent will use the trading profits to purchase non-tradable Treasury bonds. This is critical because it preserves the pricing mechanism for TradFi institutions that use Treasury bonds as collateral and loan repayment capacity.

Step 4: Social Media Bank

To further solidify the role of the dollar outside of China, where large US social media platforms (Facebook and X) are banned, Bessent encouraged Zuckerberg (Facebook CEO) and Musk (X CEO) to allow USD stablecoin transfers within their apps. Obviously, they should use Ethena’s synthetic USDe. Now, the entire world, most importantly the Global South, where Facebook, WhatsApp, and Instagram are the primary means of online communication and commerce, will use USD banks. This completely negates any attempt to de-dollarize these countries. And leaders can’t stop it because if they try to take away the digital dopamine of the civilians, there will be a revolution overnight. The US can’t even ban Chinese-owned TikTok because the youth will burn any politician associated with the ban at the next election.

As surpluses of digital dollars accumulate in the grassroots system, these can be saved in the form of Bitcoin or other cryptocurrencies. If the price of Bitcoin gradually rises, small holders will be tempted to sell Bitcoin back to the Treasury in exchange for 100-year bonds. Now, U.S. debt is no longer held by a few countries, but by the grassroots people around the world. Managing a few cats is difficult, managing billions of cats is impossible. That is, it is unlikely that all debt holders will flee at the same time. Ultimately, the Treasury wants its debt holders to be careful.

Technology Blueprint

Whatever World Liberty Financial tells investors they are building; this is what they should be doing. In case you don’t know, World Liberty Financial (WLF) is a cryptocurrency outfit associated with the Trump family. The goal here is to bring instant change to the US Treasury by leveraging Web3 and WLF to help build infrastructure. This removes the intermediation role of large “too big to fail” banks, but what have they actually done for the Empire besides causing financial crisis after financial crisis, requiring money printing to bail them out, and ultimately causing monetary inflation that destroys the soul of the Empire? Just take a stroll through the fiat financial capital of New York under American rule. The nightclubs are brightly lit, but depressing scenes of poverty, homelessness, and crime pervade everyday life.

The Web3 tech stack should be powered by public chains. You all know what’s going to happen. It’s always closed! In that spirit, Aptos is the best choice. It’s the fastest (800ms), cheapest ($0.00005 per transaction), and most reliable (99.99% uptime) public blockchain for high-performance financial transactions. And it shows. Aptos is quietly approaching the top three networks with the most institutional assets on-chain, according to RWA.xyz, and has partnerships with the likes of Franklin Templeton, Brevan Howard, and Microsoft. Its MOVE architecture was designed specifically inside Facebook to handle financial transactions for the world’s largest social network.

Maelstrom is not going to be given away for free. To be clear, we own a lot of Aptos and Ethena.

The U.S. Treasury Department needs an on-chain exchange that can trade digital dollars, century bonds, and Bitcoin.

First, the Treasury needs a digital dollar. Tether’s USDT and Ethena’s USDe should be recognized as digital dollars. USDT is simply dollars held in custody in the U.S. banking system. USDe is long crypto plus short perpetual swap, resulting in a synthetic dollar; all assets are held in custody on major crypto exchanges. Politics is about the boys’ work, so how does the existing government benefit from choosing either solution? U.S. Commerce Secretary Howard Lutnick owns equity in Tether. WLF owns millions of dollars worth of Ethena’s governance token $ENA. If Tether and Ethena are chosen as the digital dollars approved by the U.S. Treasury, both equity and token holders will benefit. Self-interest is what makes human civilization tick.

Second, the Treasury needs to tokenize the Century Bonds. The Treasury issues a token (TSY100) that represents each bond. TSY100s are available for purchase on Aptos using wrapped Bitcoin (you can already wrap Bitcoin using Wormhole, Celer, and Layerzero). Next, a repo facility where TSY100s can be pledged and USDT or USDe loans created.

Note: Technically, the Treasury cannot create USDT or USDe. Therefore, if a staker wants USDT, the Treasury must mint USDT by sending USD to Tether’s bank account. If a staker wants USDe, the Treasury must mint USDT and then mint USDe; all of which can be done using API transactions provided by Tether and Ethena.

Third, the Treasury needs to build a licensed Web3 money market exchange, which we call EagleSwap. The Treasury already has an authenticated service called ID.me (this is just one example of an online identity verification service). This service can be extended so that any user in the world can sign a message to add the Aptos wallet to the whitelist. When you connect your Aptos wallet to EagleSwap from your desktop or mobile device, you can swap between USDT, USDe, TSY100, and wrapped Bitcoin if you are whitelisted. EagleSwap will quickly become the most liquid place to trade these instruments, as Bessent is taking charge of the world’s largest fiat currencies, buying and selling Bitcoin, USD, and Treasuries.

The next phase of connectivity is between the US Treasury and Broligarch owned social media platforms. Facebook and X are two of the leading social media candidates to launch crypto wallets to their global user bases. By connecting users to EagleSwap in an abstract way, users can now transfer, trade and store digital dollars, Century Bonds and wrapped Bitcoins. The most pressing need of the Global South is to trade in USD outside of their TradFi banking system. The USD is a shitcoin, but most other fiat currencies have Marburg Ebola. Again, connective tissue should be built with Aptos.

Judging by their prime seat at Trump’s inauguration, the Broligarchs are definitely in power. They need to take the next step and clamp down on the parasitic TradFi banks.

I have discussed unilaterally devaluing the dollar and the techniques for implementing this policy. Next, I will discuss why the United States could have an unfair advantage in “producing” a neutral reserve asset if it enacts the right legislation.

Neutral Reserve Assets

For the elites who run the United States to accept this solution, the United States must have some unfair advantage in Bitcoin mining. To mine Bitcoin, energy must be expended to solve random puzzles. The first question is, does the United States have cheap, abundant energy?

The United States has two things going for it when it comes to energy production. First, there are vast untapped hydrocarbon deposits surrounded by the imaginary curve that humans call the United States. All that’s needed is funding and approval for drilling. The best thing about drilling, which will eventually power Bitcoin mining farms, is that it doesn’t matter where the energy source is located. Often, energy sources are located far from the population centers they serve. The transportation of hydrocarbons is sometimes more costly than the marginal cost of drilling. However, if you transport the hydrocarbons to an on-site power plant that simply provides the electricity to mine Bitcoin, then you don’t have to pay for transportation. A lot of remote areas have abundant energy, so instead of building politically controversial pipelines and roads to transport hydrocarbons, these places can simply build local power stations and Bitcoin mines. Alaska is remote, rich in hydrocarbons, and has a cold climate for much of the year. It’s the perfect place to build a Bitcoin mine powered by stranded energy.

America’s second commitment is to capitalism. I’m not saying that’s morally good or bad; it’s just a statement of fact. The United States is a country founded by a bunch of tax-evading slave traders who wrote a constitution that guaranteed their capital would increase in value over time and allowed their descendants to remain in power, both economically and politically. What better place to start a multi-year project than drilling for hydrocarbons and mining Bitcoin?

Another benefit is the construction of domestic semiconductor fabs in the United States. Taiwan Semiconductor is nearing completion of several state-of-the-art fabs in Arizona. The government will strongly encourage other foundries to build fabs in the United States through subsidies and tax breaks. Bitcoin ASIC chips can be produced domestically, so there will never be a shortage if global demand rises significantly with prices.

There is a huge problem: while fiat capital is treated world-class in the US, Bitcoin and cryptocurrencies are not. What is needed is constitutional support for Bitcoin and cryptocurrencies. Bitcoin miners cannot conduct any kind of censorship, but lawmakers may require miners and/or node operators to conduct censorship. Public crypto ledgers need to become a protected form of speech. This makes sense because public blockchains are digital immutable chains of speech hosted on a decentralized network powered by miners burning electricity.

If the United States wants to be the best place to mine Bitcoin, it needs to enact a simple bill of less than two hundred words:

“Cryptocurrencies and tokens that reside on or are powered by blockchains are forms of protected speech. All applicable laws protecting free speech apply to users or intermediaries of public blockchain technology. Cryptocurrencies and public blockchains are private, and no government agency may compel intermediaries, participants, or node operators of the blockchain itself to collect and generate data about participants and transactions.”

With a pro-energy government and the passage of crypto legislation that supports permissionless innovation, the United States would have what it takes to bring the majority of global crypto activity within its borders. Given the large capital expenditures for energy production and ASIC chip manufacturing, coupled with liquid fiat capital markets and legal protections for peer-to-peer decentralized network operations, the United States would become home to the majority of the Bitcoin network hashrate. The neutral reserve asset would then effectively be produced within the United States.

Finally, overturning such legislation will be extremely difficult. Despite the outcry from some politicians about the negative impacts of big tech and social media companies, there has been little progress in repealing Section 230 of the 1996 Communications Act, which gave tech platforms immunity for content and activity hosted and conducted on their networks. The status quo is simply too lucrative. Similar marriages of convenience will form between cryptocurrencies and politicians, and between crypto companies and individuals desperate for high-paying jobs and a larger tax base.

Holder

If Bessant can push the price of Bitcoin above $1.8 million, it will create the richest person in human history. Some of the largest Bitcoin holders live in the United States or are U.S. companies. Less than a year after the launch of its Bitcoin ETF, BlackRock holds nearly 600,000 Bitcoins, worth nearly $60 billion. Given that political power in the United States is largely based on wealth, this group will be able to wield enormous political influence. If the Republicans implement these measures, cryptocurrency holders will become loyal supporters for years or decades.

Remember, the goal of a politician is to get re-elected. Everyone who agrees with his political philosophy, except Trump, will be re-elected in 2026 or 2028. As a Republican politician, what better way to ensure that you remain in power than to make American cryptocurrency holders extremely wealthy while further consolidating the hegemony of the US dollar?

Global response

Will other surplus countries accept Bitcoin as a reserve asset to replace Treasury bonds?

Yes.

Assuming Bitcoin’s market capitalization is large enough to support trillions of dollars worth of transactions, it has many advantages over Treasury bonds.

• Bitcoin's code cannot be unilaterally changed by anyone.

• Even if some US miners tried to hard fork the blockchain, excluding certain transactions or changing the total amount of Bitcoin mined, it would cause Bitcoin to drop to zero on the new chain and all of their assets would instantly become worthless. The economic game theory behind the Bitcoin blockchain dictates that this will not happen.

• As long as there is an Internet connection, Bitcoin can be accessed and traded anytime, anywhere without permission.

• Bitcoin is the purest monetary energy derivative imaginable by humankind. As such, it will retain the energy value of transaction surpluses over time.

No country, not even China, would want to be the issuer of the global reserve currency and have its national debt become the global reserve asset. The natural consequence is the requirement for open capital accounts and the adverse effects on most people when you stop producing any real products and just engage in financial engineering. This is certainly not "shared prosperity". Therefore, a system that retains the US dollar for trade, and even bilaterally exchange local currencies, but the surplus is held in the form of Bitcoin is an improvement for everyone...except the traditional financial institutions that are too big to fail, and watch their power and prestige fade away while decentralized finance rises day by day.

A wish come true

Stacking Sats is my game, and I hope it's yours too. So if you ever find yourself sitting at the Elf's table, dressed to impress, make the right wish.

postscript

Cryptocurrency enthusiasts are among the smartest people in the world, and also among the most naive, but Trump is offering a crash course in politics.

In less than 60 days, the cryptocurrency price rose from $70,000 to $110,000, based on every cryptocurrency enthusiast who can fulfill all the desire for how cryptocurrencies are regulated under the U.S. The first problem with this idea is that in a bilateral exchange of value, you always want to receive goods first and then pay. Trump and the Republicans first got what they wanted from cryptocurrencies: enough votes to win the presidency and get a party majority in the House and Senate. Now it’s time to “pay”, and they are not on the same candle timeline as us depraved speculators.

I say that because Trump is creating a task force, a Senate subcommittee, rather than taking action. When Trump wants to act, he takes action. The 25% tariff on the largest trading partner of the United States was announced and implemented within a few days. The cancellation of ESG and DEI policies within government agencies came quickly. I cite these examples to prove that Trump is not doing something positive for cryptocurrency, but cryptocurrency regulation or Bitcoin strategic reserves are not his or the party’s priority. This is a shame because on the edge, cryptocurrency single issue voters put them in power.

As the global community quickly realizes that American politics has not changed so dramatically because of Trump’s election, the price of cryptocurrencies will fall to the level of the fourth quarter of 2024. I still call for a retest of the $70,000 to $75,000 Bitcoin.

What can get cryptocurrencies out of this dilemma? The Federal Reserve, the U.S. Treasury Department, Japan, etc. print money in some form, or allow specific legislation that does not require permission to crypto innovation. The Frankenstein Crypto Act will benefit Coinbase, BlackRock and Stonk investors. But for us cryptocurrency degraders, this will not push the market to new heights. This will not further achieve the goal of decentralization. This will be an insult to God, and the punishment will be swift and severe.

There is hope, if you are a U.S. cryptocurrency holder, hurry away and let the representatives you choose know that you won’t support politics as usual. Send them an email, write or visit their local offices. Politicians are very positive about those interested in policy. If you think Bitcoin strategic reserves are necessary, get furious now and don’t just like X’s comments. The problem is, our digital devices allow us to rage inside our echo chambers, but rarely encourage us to take concrete actions in the real world that require a little effort. Everything you really value comes at a price. There is no simple button to crypto politics – open your eyes and be careful what’s underneath.

Notes

[1] See the U.S. Treasury Monthly TIC Database.

[2] A repurchase agreement or a repurchase agreement is a loan in which one party exchanges assets such as bonds with the other party for cash at a certain interest rate. When maturity occurs, the bonds and cash will be exchanged back to the original holder.