The delusions behind a bitcoin strategic reserve

[Nevilledog]

https://www.ft.com/content/73fa6fd9-6f34-4e59-8f0f-04de3be7387a

No paywall link
https://archive.li/LzNqn

In July, Cynthia Lummis, a US senator from Wyoming, introduced a bill to establish what she called a “strategic bitcoin reserve”, a programme instructing the Treasury and the Federal Reserve to buy a million bitcoins over the next five years to then hold them for at least 20 more years.

Donald Trump made vague noises in support of bitcoin and crypto during his campaign. With his election, the hope behind Lummis’s bill has started to gather weight, particularly among the people with private bitcoin holdings of their own. This stands to reason. If you held a portfolio of Andy Warhol paintings and someone in Washington proposed a strategic Warhol reserve, you’d be excited too.

The bill lays out a mechanism for paying for the reserve. Any surplus the Federal Reserve returns to the Treasury would be spent instead on bitcoin. The Fed doesn’t currently return any money to the Treasury. No matter. The bill also proposes that Fed banks mark all their gold certificates to the current market price of gold, then remit the difference to the Treasury to buy bitcoin. This is all plausible, but the bill doesn’t answer the most important question facing any piece of legislation: how will this change anything at all, for anyone?

A reserve would present both a consummation and an irony for bitcoin’s hardcore supporters — the hodlers. The state would recognise what hodlers call freedom money, but also prop that up with a state programme. The preamble to Lummis’s bill argues that in return, a million bitcoin would diversify America’s assets, improving financial and monetary resilience. Unlike a traditional banking reserve, however, they would be held by the Treasury and couldn’t start to be sold until 2045. An asset you cannot sell does not give you resilience. It gives you storage costs.

*snip*

[MineralMan]

1. Now, there's a dumbass idea. It will be popular with MAGA.

[Irish_Dem]

2. It is a way to devalue the dollar for Putin.

And Trump and Musk to become vastly wealthy draining the US Treasury.

[Orrex]

3. Soon I'll have enough bitcoin to buy both Park Place AND Boardwalk

[intrepidity]

4. "Storage costs"?

That sounds like an ironic problem, no?

[albert992]

5. Can you elaborate?

LIke why would you say that?

[intrepidity]

8. Because it is a digital asset.

While I understand that even digital assets must be stored *somehow*, it just doesn't quite invoke the same image as, say "all the gold in Fort Knox" for example.

[marble falls]

15. No. It's worse. The electric needed for a secure cyber currency and it's security is scary ...

https://www.theverge.com/2024/1/24/24049047/data-center-ai-crypto-bitcoin-mining-electricity-report-iea

[lame54]

6. Fort Nots

[Turbineguy]

7. According to Cathie Wood Bitcoin is going to $600,000.

But this is the same fantasy as privatizing Social Security. If the money was invested in the stock markets, the price of shares would skyrocket.

[viva la]

9. The point of a strategic reserve is to reserve things we might need....

Like OIL.

Bitcoins are like tulip bulbs... only tulip bulbs actually have a use once the speculation is over.

Trump is just paying Elon off with this.

also, Bitcoin is at $95K (and, let's remember, based on NOTHING REAL).

So a million bitcoin in January could cost.....


$95,000,000,000

$95 Billion.

Also, the number of bitcoins is capped, right? So buying this many will increase the price right away. And they can't be sold till 2045?
$95 billion in a wallet waiting to be stolen by the many bitcoin hackers-- for 20 years.

If we have $95 billion available, maybe we should pay down debt and save some money.

[Blue Full Moon]

11. Muskrat wants DOGE not bit coin

[Celerity]

17. I have seen this faulty 'tulip versus bitcoin' attempted comparison since I joined DU. It fails at multiple base levels.

1. Bitcoin is a fungible asset, tulips are not. (fungibility is the property of a good or a commodity whose individual units are essentially interchangeable)

2. Bitcoin is durable, tulips are not. Tulips are a plant with a limited lifespan, especially for the flowers once they bloom. Bitcoin, once mined, goes onto the permanent de-centralised blockchain public ledger. To transfer bitcoin, the blockchain verifies the sender's public and private keys, and the recipient is given a new private key. The transaction is recorded on the blockchain in a file and becomes part of an automatic verification process.

3. Tulips require a complex physical supply chain/delivery process, one that can take a long time and can be impacted by physical conditions. Bitcoin can be transferred to someone anywhere on the planet within seconds or minutes, via any device that can access the stored bitcoin and the blockchain on the internet.

[bucolic_frolic]

10. That's like an insurance company buying a box of toothpicks

as a strategic reserve to rebuild your house in the event of a catastrophic claim.

It enables Congress using the Treasury and Federal Reserve to create money.

No way Jerome Powell will go along with this.

[Blue Full Moon]

12. San Salvador has made bitcoin it's currency

But what I have been reading pretty much said if crypto currency is made our currency it will cause hyperinflation.

[Celerity]

18. It is El Salvador, and BTC is simply legal tender there. The main currency (since 2001) is the US dollar.

The Salvadoran colón was the currency of El Salvador from 1892 until 2001, when it was replaced by the US dollar, with the colón is no longer in circulation. Bitcoin is not widely used in El Salvador, the adoption rate has been very low.

[Blue Full Moon]

19. Yes they are using both

There is a push to make it the currency. There is talks for it very recent.

[Celerity]

20. That isn't what you stated in your first reply, as you made it sound like BTC was their only (or at least main) currency

I have seen nothing about making it the only currency, especially given its very low adoption rate in the country.

Do you have a link for this:

There is a push to make it the currency. There is talks for it very recent.

TIA

The most recent article I found says that it is not working out since the 2021 legal tender move.


A Week of Failing To Pay With Bitcoin in El Salvador

The country claims to be a leader in crypto transactions. But you can't force people to take a currency they don't want.

https://reason.com/2024/10/31/a-week-of-failing-to-pay-with-bitcoin-in-el-salvador/

When President Nayib Bukele promised that bitcoin would be accepted everywhere in El Salvador, it seemed like a glimpse into the future—a world where cryptocurrency would be woven into everyday life. But after a week there, I found a different reality. Not a single business accepted my bitcoin. In September 2021, El Salvador became the world's first country to adopt bitcoin as legal tender alongside the U.S. dollar. The vision was ambitious: According to Bukele, bitcoin would "improve the lives and the future of millions," making it easier to access financial services where traditional banking is often out of reach.

To incentivize adoption, the government launched the Chivo wallet app, offering $30 in bitcoin to anyone who signed up. Bitcoin ATMs popped up nationwide and plans were announced for Bitcoin City, a tax-free, bitcoin-powered metropolis fueled by geothermal energy from a volcano. El Salvador was on its way to become a global crypto hub. Yet my trip to El Salvador revealed a gap between the promise and the reality. At restaurants, hotels, and shops, my attempts to pay with bitcoin were met with confusion or outright rejection. Despite a 2021 law requiring businesses to accept bitcoin, every establishment I visited turned it down. Instead, I received puzzled looks from waiters, clerks, and cashiers who seemed more perplexed than prepared.

A recent survey conducted by Francisco Gavidia University in San Salvador found that 92 percent of Salvadorans don't use bitcoin. This marks an increase from the 88 percent found in a similar study conducted by the Central American University, San Salvador last year. Some locals shared their reasons for opting out. At Lake Coatepeque, one waiter told me he skipped downloading the app entirely because he "didn't want to give his personal information to the government." In Santa Ana, another waiter said he wasn't interested in bitcoin because he "didn't understand how it worked" and had "no intention of learning." Others admitted they were scared by the technical glitches in the Chivo wallet. In fact, only about 20 percent of citizens downloaded Chivo wallet and claimed the $30 in bitcoin bonus—a surprisingly low rate given the allure of free bitcoin. (As a Salvadoran citizen myself, I couldn't resist.)

Despite low adoption rates, Bukele remains committed to his vision, continually growing El Salvador's bitcoin holdings. Currently, the country holds around 6,000 bitcoin and has plans to buy more. Yet when the Francisco Gavidia University survey asked respondents "what should be the main focus for the future of the country," only 1.3 percent responded "bitcoin." Meanwhile, the International Monetary Fund has voiced concerns about the country's bitcoin experiment. "What [IMF] has recommended is a narrowing of the scope of the bitcoin law, strengthening the regulatory framework and oversight of the bitcoin ecosystem, and limiting the public sector exposure to bitcoin," said Julie Kozack, the IMF's director of the communications department. Bitcoin usage might be more prevalent in the capital or in crypto hotspots like Bitcoin Beach, but elsewhere adoption remains limited. For now, Bukele's bitcoin revolution feels more like a distant vision than a daily reality for most Salvadorans.

snip

[Blue Full Moon]

21. You really do need to quit harassing me.

[Celerity]

22. I am not harassing you, I am only responding to what you posted, and doing so with no malice whatsoever.

That said, here ends my colloquy with you, cheers.

[617Blue]

13. Can we buy a newspaper with it?

[Abolishinist]

14. So, at the end of his term, having access to everything,

the former will take a tour of the Treasury and obtain a list of all the Bitcoin addresses and their private keys. Brilliant!

[jmowreader]

16. Fortunately...

...the "storage costs" of keeping a million BTC are minimal - a fairly small flash drive will do it, although HOPEFULLY they use something a bit more archival for that.