Summary:
Trump's proposal for a Strategic Bitcoin Reserve sparks outrage among economists.
$119 million invested by the crypto industry to gain Trump's support.
Government endorsement legitimizes cryptocurrencies, potentially benefiting existing holders.
Executive order transfers seized crypto assets to government reserves.
Critics argue cryptocurrencies are used to gamble and lack intrinsic value.
A New Kind of Reserve?
Imagine if President Bill Clinton had created a Strategic Beanie Baby Reserve to address national debt or if President Joe Biden had established a Hunter Biden Paintings Asset Stockpile. In a similar vein, President Donald Trump has proposed a Strategic Bitcoin Reserve and a Digital Asset Stockpile, aiming to accumulate cryptocurrencies that are even more volatile than Bitcoin.
Economic Backlash
Trump's proposal has ignited outrage among economists. Jason Furman, a former top economist in the Obama administration, stated, "There is no argument for why the government should be buying it and holding it." Peter Schiff, head of Euro Pacific Capital Management, emphasized, "They’re just used to gamble."
Even Avik Roy, a former policy adviser to Mitt Romney, agrees that while Bitcoin might be a hedge against financial crises, there's no need to elevate non-Bitcoin cryptocurrencies, which could disproportionately benefit wealthy individuals.
From Skepticism to Opportunity
In the summer of 2021, Trump labeled crypto as a “greater fool” scam. However, as he began to see potential profit, he launched digital trading cards and his World Liberty Financial brokerage, which profits from cryptocurrency transactions.
The crypto industry has invested $119 million to gain Trump's support, leading to promises to position the U.S. as the “crypto capital” of the world. Notably, Trump’s latest executive order facilitates the transfer of seized cryptocurrencies into government reserves, while also ensuring taxpayer money isn’t used for more acquisitions.
The Legitimization of Crypto
Trump's actions provide a significant boost to the legitimacy of cryptocurrencies, which have often been viewed skeptically. The government's endorsement could help set price floors, benefiting existing holders.
A Shifting Landscape
The normalization of cryptocurrencies as legitimate assets continues to grow, despite their lack of intrinsic value compared to traditional investments like stocks or bonds. The federal government’s involvement may pave the way for further legislation that could funnel taxpayer money into the pockets of crypto billionaires.
In a modern twist on Hans Christian Andersen's tale, it may take a well-funded challenger to expose the naked truths behind the crypto industry’s façade.
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