Is it too soon to talk about Crypto yet?

[Fuddyduddy1952]

There are many discussions on X about your very point. Today in an interview with Bloomberg, David Sacks, our AI and Crypto Czar, said we need to have a Reserve because we already own Crypto and we need a better way to manage it.

https://twitter.com/x/status/1898066897326748084

Maybe I heard that differently because I don't own cryptocurrency. What David Sacks is saying is the Federal government already owns 400,000 bitcoin (or $36.4B today) from civil and criminal seizures which has value.
That's an extremely important point because what is the government supposed to do with it? To me the choice is let it be part of the Federal reserve or what I would do is wait until price rises again (?), then use it to buy gold bullion then stored in Fort Knox.
It's a matter of risk. Gold is tangible and will always have value (about $400B at Fort Knox today).

 

[MinnesotaEric]

True...but those digital examples all originate from tangible things, not ether. Music made by musicians with instruments.

I hear what you are saying. In my mind our discussion about intangibles circles right back around to what we call money. Hear me out.

Historically money has been represented by something relatively scarce. In a simple sense, the scarcity of the thing represented a store of "power" or "effort." Spending the money deployed that storehouse of power or effort to purchase or exchange for goods or services that took either power or effort or both power and effort to create.

But long before either of us were born, what we call "money" became debt-based. Money as debt became an "I owe you" for the equivalent of the money's face value. It used to be the paper money used in exchange for goods and services represented a tangible item that actually held the face value of what the paper money represented. But we moved away from having a connection of paper money representing anything of value when we moved away from a metals standard.

For this reason, we never updated the value of the gold stored at Fort Knox because the value of the gold didn't matter to the value we assigned to our paper money. The value of the gold no longer mattered because our paper money was no longer backed by tangible items, but by the faith we entrust in it that people will accept our money as payment for goods and services because our nation has declared the paper money as fiat currency of the nation.

So what we call money became a faith-based medium of exchange for goods and services based on the level of trust entrusted in our nation.

But because of a variety of reasons, the money supply of our nation has continued to endlessly expand and this expansion has slowly decreased the notational buying power. We call it inflation and generally speaking, we've been taught that inflation is a good thing because, over time, inflation diminishes the value of existing debt.

We experience the diminishing value of everything valued in fiat through the ever-increasing cost of everything because of the ever-expanding supply of our money.

But what if the money supply was fixed to a given amount, what would happen then?

 

[quicksandfarmer]

Here is a specific use.

Loading…

finance.yahoo.com

There's nothing "crypto" about that use, in that it doesn't rely on any crypto capability like anonymity, irreversibility or the ability to function in an absence of trust. Each party to the transaction is dependent upon a trusted intermediary at their end of the transaction, it could just as well be a bank wire transfer, Western Union or an Apple gift card.

I suspect the reason they want to use crypto instead of one of those other methods is that these are countries which have currency controls which make conventional transfers difficult. If so, this is probably illegal. In which case we're still looking for use cases which don't involve illegal activity.

 

[quicksandfarmer]

We experience the diminishing value of everything valued in fiat through the ever-increasing cost of everything because of the ever-expanding supply of our money.

But what if the money supply was fixed to a given amount, what would happen then?

We had that until 1932, when the country was on the gold standard, which for practical purposes meant that the money supply was fixed, at least in the short term.

Throughout the 19th and early 20th century the economy was characterized by a boom and bust cycle. The economy would start to grow but since the money supply was unable to grow with the economy the lack of money would drive interest rates up, causing the economy to crash and banks to fail. They called it a financial "panic," -- although today we would call it a recession or depression -- and it was generally accepted that it would happen about every ten years.

It's no coincidence that 1932 was the year that the US decided it had had enough of the gold standard and needed a money supply that could expand with the economy.

 

[quicksandfarmer]

Maybe I heard that differently because I don't own cryptocurrency. What David Sacks is saying is the Federal government already owns 400,000 bitcoin (or $36.4B today) from civil and criminal seizures which has value.
That's an extremely important point because what is the government supposed to do with it? To me the choice is let it be part of the Federal reserve or what I would do is wait until price rises again (?), then use it to buy gold bullion then stored in Fort Knox.
It's a matter of risk. Gold is tangible and will always have value (about $400B at Fort Knox today).

Good point. I would ask why the government needs to "manage" its supply of cryptocurrency anyway, why doesn't it just sell it like any other seized asset? Isn't the whole appeal that it exists independent of any government management?

And if it's supposedly immune to any government regulation, tracking, or taxation, how did it happen that the government was able to seize $36 billion dollars of it?

 

[Fuddyduddy1952]

I hear what you are saying. In my mind our discussion about intangibles circles right back around to what we call money. Hear me out.

Historically money has been represented by something relatively scarce. In a simple sense, the scarcity of the thing represented a store of "power" or "effort." Spending the money deployed that storehouse of power or effort to purchase or exchange for goods or services that took either power or effort or both power and effort to create.

But long before either of us were born, what we call "money" became debt-based. Money as debt became an "I owe you" for the equivalent of the money's face value. It used to be the paper money used in exchange for goods and services represented a tangible item that actually held the face value of what the paper money represented. But we moved away from having a connection of paper money representing anything of value when we moved away from a metals standard.

For this reason, we never updated the value of the gold stored at Fort Knox because the value of the gold didn't matter to the value we assigned to our paper money. The value of the gold no longer mattered because our paper money was no longer backed by tangible items, but by the faith we entrust in it that people will accept our money as payment for goods and services because our nation has declared the paper money as fiat currency of the nation.

So what we call money became a faith-based medium of exchange for goods and services based on the level of trust entrusted in our nation.

But because of a variety of reasons, the money supply of our nation has continued to endlessly expand and this expansion has slowly decreased the notational buying power. We call it inflation and generally speaking, we've been taught that inflation is a good thing because, over time, inflation diminishes the value of existing debt.

We experience the diminishing value of everything valued in fiat through the ever-increasing cost of everything because of the ever-expanding supply of our money.

But what if the money supply was fixed to a given amount, what would happen then?

Harry Truman was president when I was born and I still have silver certificate bills from the 50s. Show me where cryptocurrency is legal tender as is stamped on our currency. It's not.
One could argue ALL goods and services is faith based. US currency ($2.3T from what I looked up) is tangible and marked legal tender for debts public and private.
I haven't been to any store that says an item is "$20 or 0.00023476 Bitcoin."
Some economists say it's worth less than $zero because of all the computing electricity it requires...paid for by tangible money.
Everything is worth what a buyer is willing to pay for it, but never in history have I heard of something intangible having value except labor.

 

[MinnesotaEric]

We had that until 1932, when the country was on the gold standard, which for practical purposes meant that the money supply was fixed, at least in the short term.

Throughout the 19th and early 20th century the economy was characterized by a boom and bust cycle. The economy would start to grow but since the money supply was unable to grow with the economy the lack of money would drive interest rates up, causing the economy to crash and banks to fail. They called it a financial "panic," -- although today we would call it a recession or depression -- and it was generally accepted that it would happen about every ten years.

It's no coincidence that 1932 was the year that the US decided it had had enough of the gold standard and needed a money supply that could expand with the economy.

Yup, you're right. There is something of a correlation between a fixed supply of say Bitcoin and anything else that is rare, but not unique. We see the boom and bust cycle to this day where cheap money lending (low interest) expands the velocity of commerce, where the expansion is thought to be real growth, but is really the result of the expansion of money supply, and then inflation sets in leading to a slowing of the velocity of commerce through increased interest rates.

Keynesian economics holds that we can control or dampen the boom and bust cycles through the careful regulation of interest rates while Austrian economics holds that we should allow the bust cycle to happen because without the cathartic bust, bad actors never get weeded out and debt in the system grows and grows until it is no longer possible to manage or sustainable and the money system collapses causing far more damage than a seasonal bust cycle. History has tended to side with Keynesian theory as central bankers around the world continue to steer markets.

This is to say that sovereign debt has continued to accumulate throughout the world. If the value or the purchasing power of any given fiat currency was the sole determiner of the value of assets, we see asset values accretively grow in value. Demand (for various reasons) also affects asset valuations, but generally, people invest in various asset classes and those asset classes that offer the best returns generally find favor with the investor class.

Putting this economic discussion into the context of asset classes, we can then ask what asset classes look as though they will perform better than inflation over time, or taking it a step further, what are the best asset classes to invest in?

 

[MinnesotaEric]

Harry Truman was president when I was born and I still have silver certificate bills from the 50s. Show me where cryptocurrency is legal tender as is stamped on our currency. It's not.
One could argue ALL goods and services is faith based. US currency ($2.3T from what I looked up) is tangible and marked legal tender for debts public and private.
I haven't been to any store that says an item is "$20 or 0.00023476 Bitcoin."
Some economists say it's worth less than $zero because of all the computing electricity it requires...paid for by tangible money.
Everything is worth what a buyer is willing to pay for it, but never in history have I heard of something intangible having value except labor.

It takes energy to "mine" Bitcoin and to maintain the network. As such, in a basic form, Bitcoin is viewed as a store of energy.

 

[quicksandfarmer]

It takes energy to "mine" Bitcoin and to maintain the network. As such, in a basic form, Bitcoin is viewed as a store of energy.

Except there's no way to get that energy back. One-way storage is better known as disposal.

 

[MinnesotaEric]

Meanwhile, yesterday's 2025 Crypto Summit was pretty much a nothing-burger, back-slapping event that did not present any new policy. However, according to Keven O'Leary, the Thursday night parties were much more interesting with Kevin tweeting,

"Everyone’s talking about Trump’s Bitcoin reserve, but the real story is the shift in regulation. Crypto is finally moving out of the lawsuit era and into real policy. Plus, the push to digitize the U.S. dollar is gaining steam, this is how we keep America on top. Warren’s not happy, but even her own party sees the writing on the wall. I was in D.C., I got the signal, this is happening."

https://twitter.com/x/status/1898384069978620196

What is interesting is our President promised no CBDC central bank digital currency while on the campaign trail and this was said because most crypto people are against central bank digital currencies because they give too much power to their governments as to where and how money can be spent as well as making it easy to track spending.