Make America Grift Again
The Strategic Crypto Reserve is an embarrassing grift
In this issue:
Buying cheese isn’t strategic unless cheese is part of your strategy
Don’t shoot your enemies with bullets made of gold
Maybe the real strategic reserve is the friends we made along the way
Make America Grift Again
In a series of converted limestone caves underneath Missouri the U.S. government maintains the world’s largest strategic reserve of cheese — roughly ~1.4B pounds. There are some government programs that make use of the cheese (food assistance, school lunches, etc) but for the most part the cheese is just a way to store the excess milk the government buys from dairy farmers. The purpose of the program is to give dairy farmers money — the cheese reserve is just a side effect.
In unrelated news, President Trump posted the following to Truth Social on Sunday:
A few hours later he added “obviously, BTC and ETH, as other valuable Cryptocurrencies, will be the heart of the Reserve. I also love Bitcoin and Ethereum!” as an afterthought. The price of Bitcoin soared from ~$85.5k/BTC to ~$95.5k/BTC (around ~11.5%). Those gains proved to be pretty ephemeral — as of writing the price has crashed back down to ~$85k/BTC.
Part of the reason that the price moved so much is because the announcement was on a weekend when traditional markets were closed and the trading book depth was much thinner. Another part of the reason is because some "lucky" trader opened a ~$123M long position at 50x leverage on both BTC and ETH just before the announcement went out.1 Very cool!
In another super cool coincidence the list of assets to be included in the crypto reserve happen to be the top five assets held by South African venture capitalist and Trump administration "Crypto Czar" David Sacks in the Bitwise Crypto ETF. Very strategic!
It is, of course, not legal for the President to use American tax money to buy things from his friends – giving money to the president’s friends normally requires an act of Congress, since Congress has constitutional authority over the budget. Of course, it also doesn’t seem like this administration cares what the law says or what Congress thinks. As a matter of constitutional theory I don’t think the crypto reserve is viable. As a matter of practical reality, I don’t think anyone cares.
ADA and XRP are transparently worthless scams whose only product market fit has been selling to rubes. I’m not going to bother defending that claim. If you are smart enough to read this sentence without moving your lips you are smart enough to figure that out on your own. We would honestly and sincerely be better off holding a strategic reserve of DOGE.
BTC, ETH and SOL are — in some ways — more reasonable assets. I don’t invest (or recommend investing in) Ethereum or Solana, but I do think they are interesting platforms and worth learning about. Intelligent people could have an intelligent discussion about their value and potential and how much exposure an investment portfolio should allocate to each of them.
The thing is … America is not an investing club. The purpose of the federal government is not to buy low and sell high. America should not be creating a strategic reserve of crypto assets for the same reasons it shouldn’t be creating a strategic reserve of Apple stock or luxury watches or Pokémon cards. The government owning a lot of something doesn’t make it strategic.
A strategic reserve of something only makes sense if you (a) might need it (for war) and (b) you can’t easily buy it (during war). So a stockpile of oil or steel could be a reasonable strategic reserve — you need both of them to fight wars and you might not be able to buy enough, especially if you are fighting with the countries that produce them.
A stockpile of bitcoin is not strategic, even if we both agree bitcoin is extremely valuable. The American military has no use for bitcoin and even if it did America already has plenty of domestic bitcoin capacity. We can buy whatever BTC or Bitcoin mining power we need from American companies — if and when we need them. Buying bitcoin today is just a subsidy for people who already own bitcoin. The same is true (in order of increasing shamelessness) for SOL, ETH, ADA and XRP. None of these assets has a strategic purpose.
The argument that people advocating for "strategic reserves" of crypto assets are making goes something like this: the government has a strategic reserve of gold, crypto is the new digital gold, ergo the government should have a strategic reserve of crypto. The problem with this line of reasoning (aside from the fact that most of the crypto assets under discussion are at best digital pyrite) is that the gold owned by the federal government is very much not a strategic reserve.
Gold is not a military asset. You can’t use it to make bullets or tanks. You can sell it, of course, but America does not need to sell things to raise money because America prints the money. Dollars aren’t valuable because there is a pile of yellow rocks in a vault at Fort Knox. Dollars are valuable because they are the currency of choice for the deepest and most liquid capital markets in the world. The pile of yellow rocks at Fort Knox is a historical accident. The only reason we haven’t sold it is because selling that much gold would crush the price and make gold investors unhappy.
Anyone trying to measure the wealth of the American government the same way they would measure the wealth of a company or a household is making a severe category error. The economic power of the American government does not come from the things the American government owns, it comes from the strength of the American economy itself. The government maximizes its own spending power by making its citizens wealthy and then taxing them — not by hoarding expensive objects.
If Bitcoin (or indeed any of those other, stupider assets) takes off, the government doesn’t need to own any to already have exposure! They have a ~20-30% claim on the capital gains made by any U.S. taxpayer. The real Strategic Bitcoin Reserve is all the bitcoin held by Americans and American companies.
Most of the people advocating for the government to buy Bitcoin are not really advocating for a strategic reserve at all — at best they are advocating for a monetary hedge. They are anticipating (or perhaps hoping for) a possible future world where the U.S. dollar is no longer the reserve currency of the world and arguing that we should own stockpiles of any potential successor.
But again, this is a category error. America is not rich because we have a big pile of dollars in the basement. We are rich because we have the best financial markets. If everyone stopped using the dollar we would still be rich. If everyone stopped using our financial markets we would become poor even if we started off with a big pile of whatever money was popular at the time. The wealth of a nation is stored in its economy, not in government vaults.
The purpose of the Strategic Crypto Reserve is not to strengthen America or the U.S. dollar — if anything it weakens both. A strategic reserve of crypto is less like the Strategic Petroleum Reserve (SPR) and more like the caves full of government cheese in Missouri. It’s not a strategic resource. It’s a government handout. But at least when we give handouts to dairy farmers we get some cheese. I’d rather set my tax dollars on fire than use them to prop up the price of XRP.
Here is Eric Trump congratulating his father on the "genius" timing of this announcement. Openly bragging about how they are manipulating markets.
Good one!