0/ So people are upset with me for opposing the Bitcoin Strategic Reserve and saying Coinbase should not buy #BTC for their treasury, have incorrectly assumed this means somehow I don't like Bitcoin.
If you think that is what I think, you are wrong and should feel bad.
1/ The misunderstanding comes from one of the problems that incessantly plagues the crypto space and, in fact, was casual to the crippling issues of 2022, that is to stay not understanding the proper roles of controls, risk management, and division of responsibility.
2/ So first, #BTC. I own some (in cold storage and inaccessible to me on a daily basis and in ETF form, before someone tries to mug me for it - you'll be very disappointed). I am in favor of it as an asset. I am on the record in the past having said I think it's not unreasonable
3/ For the average person to take the @BlackRock recommendation of owning a couple of percentage points in your portfolio and basically forgetting about it. So for those who think I don't like the asset - I do. In fact, I think #BTC serves as a powerful hedge against systemic
4/ issues of fairness, a way for people to save money outside of their local system, and as a way to prevent governments from abusing their citizens. This is also true of some other forms of crypto assets (see: stablecoins), but it's definitely true of #BTC and BTC remains the
5/ best in terms of decentralization and censorship resistance, something my friend @malekanoms has talked about repeatedly and is the kind of thing people underestimate until it really matters (and it matters most for secure savings).
6/ "Okay, but you're an idiot for opposing the BSR if you think Bitcoin is good" I hear you nigh-incoherently scream while throwing ETH rocks and Bored Apes at me.
To which I respond: you really don't get it. If you support BTC, you should be against the BSR.
7/ One, the BSR cannot save the dollar. In fact, it would accelerate the demise of the dollar, as it would be a signal to the world that the US does not intend to manage its fiscal house well and will likely re-denominate in BTC at some point. I think this is a terrible idea.
8/ First, you lose control of your monetary policy and lock yourself into the exact behavior that caused the Great Depression if you have to defend a peg or hold to a fixed supply at a time of massive economic downturn.
If you think inflation is bad, try deflation.
9/ The US has the reserve currency. We should be doing everything we can to keep our fiscal house in order in dollar terms, which means cutting the deficit and future expenditures to a sustainable path, not trying to YOLO into an asset that benefits from dollar decline.
10/ Second, as soon as you concede Bitcoin is a strategic asset, you're conceding that the US has a strategic interest in controlling Bitcoin. Think deeply about this. Do you want the US gov't seizing BTC owned by private citizens? Seizing miners in a time of stress? I don't!
11/ This also puts you in competition with all the other strategic assets, and to be honest, BTC doesn't look good here. You can't eat it. You can't shoot it at people. You can't build things with it. It's a purely monetary electronic construct.
12/ This means in a time of war or major stress, it's going to get dumped on the market in size in order to do other things. So if you are in favor of the BSR, you are in favor of the government crushing BTC prices when you most needed them in a downturn. Oops!
13/ Finally, if we think from the government perspective, you now need to have the discussion of "why BTC". Your answer is going to be "because it's going up in price!" and "because it has great returns", but this is a complete misunderstanding of the role of the government.
14/ The government exists to provide rule of law, protection, and systemic stability. It should not be and does not need to be a speculative investor. It should be focused on long-term GDP growth for all Americans. Here, the Warren Buffett critique of gold is appropriate:
15/ It just fucking sits there. BTC doesn't DO anything. It's an object for storage of value. It's equally valid to suggest the US government dig giant holes and fill them with gold. It's also equally dumb to suggest that (yes, I am in favor of running off the gold reserves).
16/ But what the government should be doing is fixing crumbling infrastructure, funding education, and focusing on delivering on wages & capital growth. It should not be focused on putting magic dirt money or magic internet money in a box.
17/ In short, if you are arguing for the BSR, you want the gov't to pump your bags at the expense of American citizens getting quality services from the government. That's not a stance I am willing to condone. The gov't needs to do a better job with the dollar, not buy BTC!
18/ Finally, corporate balance sheets: again, why? For some companies (like Coinbase) this is at least plausible, because the investors in Coinbase clearly have an interest in crypto. Even then, I'm still against it because I have to ask you this question:
19/ Why do you think Coinbase's management is the right entity to set Bitcoin portfolio allocations for all retirement investors? Do you see the problem? As soon as you start putting this on corporate balance sheets, now people have to start figuring out how to value a part
20/ operating business part Bitcoin ETF part asset management quality play, and that thing should be valued, on average and over time, at less than splitting those functions apart. This is why conglomerates underperform. I know everyone is going to point to MSTR as some kind of
21/ magical money printing machine here, but the entire market cannot be MSTR. As a thought experiment, what would happen to the US economy if, instead of reinvesting capital or returning it to investors, all US companies instead just started buying BTC?
22/ In the short term, BTC prices would rip and everyone with BTC bags would be thrilled. In the medium term, people would notice persistent layoffs and decreasing economic activity without jobs being created because, wait, all the spare economic capacity is going into BTC.
23/ In the long term, we'll have a massive economic crash from misallocation, and even the price of BTC will dramatically tank. This is essentially the mortgage crisis all over again, only BTC has even less real-world tangible value than exotic mortgage products (also very low).
24/ So no, corporations shouldn't do it. Buy BTC yourself with the profits from your position! Don't have the gov't do it, don't have United Healthcare do it on their balance sheet for more profit (yeah I went there).
Just buy BTC yourself! Why is this so hard?
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