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The crypto “industry” was one of the biggest spenders in the 2024 election. It practically single-handedly bought a U.S. Senate seat in Ohio, turfing out labor’s most reliable senator, Sherrod Brown, with $40 million in advertising. And it convinced Donald Trump to make a 180 with a big sack of campaign contributions. Back in 2021, Trump said crypto was a “scam,” but now he has his own coin, his media site is in discussions to buy a crypto exchange, and he’s fully bought into the claims that the industry is overregulated.
So now that crypto has bought great political influence, it’s time to cash in. How might this happen? The basic idea is to turn the American government into the biggest crypto bag-holder of all time. If the plan goes through, hundreds of billions of dollars of public assets will be spent or leveraged to buy a million Bitcoins, allowing the tiny minority of Bitcoin moguls to finally cash out their holdings into real money. It would be one of the biggest upward transfers of wealth in world history.
At the Financial Times, Toby Nangle explains the various plans. One idea is to loot the Exchange Stabilization Fund, which is largely under the president’s control, and has about $41 billion in net value. A much larger plan has been formally introduced by crypto shill Sen. Cynthia Lummis (R-WY). It’s called the (sigh) Boosting Innovation, Technology, and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act, and it identifies several public assets that might be drained. One idea is to reduce the capital reserve requirements at the Federal Reserve from $6.8 billion to $2.4 billion; another is to skim off the Fed’s $6 billion in annual money-printing profits.
But the biggest part of the program is to revalue America’s gold reserves. The U.S. government maintains a stockpile of about 261 million troy ounces of gold—or about 8,133 metric tons—in Fort Knox and other facilities. This is valued by statute at $42.22 per ounce, or $11 billion in total. But the market price of gold at time of writing is $2,631 per ounce. That’s more than 55 times as much, or a total of $688 billion.
Lummis proposes the Treasury issue new gold certificates based on the market price, and use the resulting cash—$677 billion at current prices—to buy up Bitcoins. In total, her bill would require the government to buy up 200,000 Bitcoins a year for five years, until a “strategic reserve” of a million would be accumulated.
This is revealing on several levels. The whole ideology of cryptocurrency is that it’s supposed to be outside the alleged corruption of governments or the extant financial system. Instead of transactions taking place on platforms run by Wall Street and regulated by the D.C. swamp, fiercely independent crypto entrepreneurs would build new businesses doing … something … out in a fresh economic Wild West.
So why on earth would buccaneering crypto people want the government scooping up a million Bitcoins—or about 5 percent of all that exist? The reason is obvious: so paper Bitcoin billionaires can cash out their holdings into real money without tanking the market.
Bitcoin “wealth” is much more concentrated than dollar wealth. While the top one-hundredth of households own about 30 percent of U.S. dollar wealth, the top ten-thousandth of Bitcoin wallet addresses hold about 27 percent of the coin. And because one entity can own more than one wallet, and wallets can be hard to identify, it’s probably even more concentrated than that.
As a result, the Bitcoin market is exceptionally illiquid. The last 24 hours saw, roughly, a piddling 660,000 transactions in Bitcoin, and something like 70 percent of Bitcoins have not moved in at least a year. That is made worse by how expensive and slow Bitcoin transactions are. By way of comparison, Amazon, which has a similar market capitalization, has seen about 40 million daily trades of its stock over the last few days.
Bitcoin has a nominal market capitalization of $1.9 trillion—the number of extant coins times the market price—but at present, if these huge accounts were to cash out, the price would collapse. Crypto boosters themselves were worried that this would happen if the government were to sell off its comparatively tiny batch of 69,370 Bitcoins—which it mostly owns as a result of the seizure of Ross “Dread Pirate Roberts” Ulbricht’s assets for attempted contract murder (someone Trump wants to pardon, by the way).
The fundamental value of Bitcoin is zero. Even by crypto standards, the coin is terrible. It is exceptionally annoying to acquire, transactions are both extremely slow and cost hundreds of times more than a bank transfer, the coins are easy to lose forever—as has happened to perhaps 20 percent of all coins ever minted—and making new ones is wasteful on a world-historic scale. The only reason its price is so high is a speculative frenzy fueled by it being the first major cryptocurrency, a fake aura of technological innovation, and a sort of cult around Bitcoin’s mysterious creator, Satoshi Nakamoto.
Therefore, for early Bitcoin adopters sitting on vast piles of purely speculative assets, there is a huge structural need to get new suckers into the market. For anyone concerned about the corrosive role of money in politics, think about what this means: The crypto industry spent something on the order of $100 million in this election to install a government that will lure sacrificial lambs to a digital asset slaughterhouse, and make a handful of big Bitcoin hoarders generationally wealthy in the exchange.
In his masterpiece documentary on the crypto ecosystem, Dan Olson points out it is certainly not a coincidence that crypto-adjacent products like NFTs require you to buy cryptocurrency to participate. Every time an NFT is created, a new bag-holder is minted. But the number of people who can be induced to pick up crypto to get a fake receipt (that is, an NFT) for a grotesque ape picture you don’t actually own is limited. In any case, most NFT transactions take place on Ethereum, because it is much easier to use.
But no one has deeper pockets than the federal government. No need to directly pick the pockets of suckers looking for a get-rich-quick scheme if you can pick everyone’s pockets indirectly by looting a vast store of treasure held in trust for the American people. It’s a logical end point for a technology whose sole meaningful use case is enabling criminal extortion and money laundering: finally carrying out the bank robber’s dream of draining the value in Fort Knox.
