Original author: YBB Capital Researcher Zeke
Preface
On March 6, local time in the United States, after US President Trump signed an executive order to formally establish the US strategic Bitcoin reserve, David Sachs, the White Houses director of cryptocurrency affairs, further clarified the reserve details on the social platform X: the approximately 200,000 bitcoins held by the federal government will all be included in the strategic reserve. These assets are all from criminal or civil forfeiture procedures, and it is clear that they will neither be sold to the outside world nor will new coins be added through the market.
In my last article published on March 4, I speculated on some follow-up situations of the strategic reserve. Coincidentally, the current situation is basically consistent with some predictions at that time. Trump did not include SOL, XRP and other altcoins in the reserve list as promised before, nor did he inject new financial funds into the BTC strategic reserve. He only put all the currently seized Bitcoins into the strategic reserve. What I didnt expect was that the landing time of the strategic reserve was somewhat amazingly fast. Trump did not hold this king bomb and hesitate to play it. With the fall of this card, the markets fantasy of the government entering the market to sweep up stocks was shattered, and BTC also adjusted all the way to a low of around 77,000. Now, no matter from which aspect, Trump seems to have very few cards left, but it is worth pondering that this crypto president who has been in the business and political circles for decades, his strategic layout is really limited to this?
1. Gold, oil, BTC?
The collapse of the Bretton Woods system, the cracks in the petrodollar and the rise of Bitcoin, the anchors that change with the times are essentially the adaptive evolution of the US dollar again and again.
The establishment of the Bretton Woods system in 1944 marked the dollar as the ultimate anchor of the global monetary system by binding it to gold (US$35 per ounce). The core logic of this design is that the physical scarcity of gold endorses the credit of the US dollar, while the network effect of the US dollar amplifies the liquidity of gold. However, the outbreak of the Triffin dilemma revealed the fatal flaw of the system - global trade expansion requires the outflow of US dollars (US deficit), while the maintenance of US dollar credit depends on the US surplus and sufficient gold reserves. In 1971, Nixon announced the decoupling of the US dollar from gold, and the United States broke free from the shackles of gold in order to maintain its hegemony. Facts have proved that any monetary system rigidly bound to physical resources will eventually collapse due to the irreconcilability of resource scarcity and economic expansion. The end of the gold dollar forced the United States to find a more flexible carrier.
The first oil crisis in 1973 gave Nixon the answer. The importance of oil to modern industry is self-evident. In July of the following year, the new U.S. Treasury Secretary William Simon and his deputy Gerry Parsky, instructed by Nixon, rushed to Saudi Arabia, the worlds largest oil producer, and signed the Unshakable Agreement to break the deadlock after the collapse of the gold system: the United States promised to provide Saudi Arabia with full military protection and security guarantees, and Saudi Arabia agreed to settle all oil exports in US dollars and purchase U.S. Treasury bonds with the excess oil revenue, in exchange for military protection in exchange for Saudi Arabia and other oil-producing countries accepting petrodollars as the only pricing currency for oil transactions. So far, we have entered the 2.0 era - oil has replaced gold as the new anchor of the U.S. dollar credit, and the petrodollar system has formed a closed-loop operation through oil trade-dollar repatriation-U.S. debt purchase. Wall Street has packaged these petrodollar debts into derivatives (the scale will reach 610 trillion U.S. dollars in 2023) and diluted credit risks through debt monetization.
The essence of this circular logic is that the United States levies seigniorage on the world through oil trade, but todays US fiscal deficit is extremely high (accounting for 7% of GDP), and the total debt has exceeded 36 trillion US dollars this year. The entire system has long evolved into a Ponzi cycle of borrowing new money to repay old debts. When the de-dollarization of oil trade gradually expands, this cycle will begin to collapse due to the lack of anchors. So whats the next step? Who will fill the gap in the next fifty years after oil?
Trump currently holds two swords in his hands, Nvidia and Bitcoin. In the high-tech narrative of AI, Nvidia almost played the role of Digital Middle East. Everyone needs computing power, but computing power can only be produced by me. Unfortunately, a certain Eastern country has taken the path that AI computing power demand can also be small and beautiful. At least before the AI Agent era is fully arrived, computing power and digital oil cannot be completely equated. (Or some countries can be self-sufficient in oil)
Lets look at another sword, Bitcoin. The idea of using Bitcoin as a strategic reserve originated from a bill submitted by Senator Loomis to Congress last year. The supporting logic is that the purchasing power of the US dollar has been declining in recent years, while Bitcoin has an average annual growth rate of 55% during the same period. Its excellent anti-inflation properties can be regarded as a new value storage tool to replace gold. Trump even said: Give them a small cryptocurrency check. Give them a little Bitcoin, and then wipe out our $35 trillion. Whether it is anchoring the US dollar or repaying US debt, I have always been opposed to these ideas in my past articles. The first point has been mentioned above. The collapse of the Bretton Woods system. As a digital currency with an upper limit of 21 million, Bitcoin is even more scarce than gold. The United States cannot repeat the Triffin dilemma again. Second, the volatility is too large and the reserves are insufficient. Based on the current 200,000 Bitcoins in the US reserve, the asset value is less than $20 billion. It only accounts for 0.056% of the size of US debt. To achieve effective anchoring, it is necessary to hold at least 30% of the circulation (approximately 6 million coins), or to increase the value of Bitcoin by dozens of times and maintain long-term price stability, but obviously neither is very realistic. Third, the dollar is pegged to Bitcoin, which will obviously increase the marginalization of the dollar. How to convert the global tax base through Bitcoin is another question.
Judging from the current implementation of strategic reserves, the Trump administration obviously cannot find a better entry point in the short term. But this card was played so quickly that I have to rethink whether they have a bigger trump card?
Based on my personal thoughts, I extend the speculation in the previous article :
1. Bitcoin scarcity does not mean that all cryptocurrencies are scarce. Most public chain tokens have deflation mechanisms. The US dollar is currently based on oil and gold. The composition of the digital Fort Knox can be mixed. BTC is gold, and public chain tokens such as ETH or SOL are oil. So with the advancement of large-scale adoption of the crypto capital, can a US-style closed loop of encryption be formed? For example, various stablecoin projects such as Usual and Tether can still promote the so-called US dollar settlement, and their composition mechanism or profit source is closely related to US debt. Is there a trace of similarity between this and the petrodollar system?
2. It is reasonable not to buy or sell at this stage, but if this is the only killer move, then the news should not be announced so early. Trump is not a fool, and the encryption team behind him is not either. There are rumors that the US sovereign fund (which is still in the drafting stage) will purchase cryptocurrencies. I actually agree that this sovereign fund is his trump card.
3. I used to think that Trump was just writing some empty checks to the crypto community for the sake of the interests behind him. But from the current situation, we may have to think big. It is only a matter of time before mainstream countries follow up with strategic reserves. I personally think that BTC is the most acceptable, and SOL and even XRP may have a higher status than ETH (as adoption progresses).
4. The largest unit in the crypto struggle is no longer the public chain. Trump has recently shown an interest in taking over the largest CEX, public chains, and various giant projects, but how to take them over remains a question, and how will the resisters fight?
5. There are rumors on Wall Street that Trump is creating an artificial recession to force the Federal Reserve to cut interest rates. Whenever the market is about to improve, Trump and Musk (Government Efficiency Department) will hit the head. So does Trump also intend to suppress the crypto market? Turn the top expectations into bubbles first? But I personally don’t agree with this. First of all, the AI bubble in the US stock market does exist. Although it cannot be compared to the Internet bubble in 2000, overheating is certain. Secondly, the combination of Trump and Musk is too heavy, which will naturally lead to external complaints, and the counterattack of the left is inevitable. The so-called recession is actually a combined force.
Regarding 1, 3, and 5, all I can do now is to speculate, but regarding 2 and 4, I think they can be expanded a little.
2. Sovereign Funds
On February 3 this year, Trump signed an executive order instructing the establishment of a US sovereign wealth fund within the next year. The Ministry of Commerce and the Ministry of Finance were required to submit an establishment plan within 90 days, including funding mechanisms, investment strategies, funding structures and governance models. The funds goals include funding infrastructure, supply chains and strategic industries.
There are more than 50 countries and regions in the world that have sovereign funds. For example, my country Investment Corporation and Hua An are ranked second and third in the worlds sovereign funds. The investment styles of sovereign funds vary according to the situation of different countries. For example, the Middle East focuses on strategic industries, Norway focuses on stock investment, and China serves private equity, real estate, and the Belt and Road Initiative. There are four main benefits of a country setting up a sovereign fund: 1. Smoothing economic fluctuations (hedging resource price risks, optimizing foreign exchange reserves management); 2. Driving economic structural transformation (such as tourism and technology industries supported by Middle Eastern countries); 3. Global financial discourse power; 4. Protecting society and building social welfare.
The background of the sovereign fund established by the United States this time mainly stems from the dispute of Tiktok. To be fair, Trump wants to buy the favorite Internet company for the American people, and secondly, it can alleviate the fiscal deficit and infrastructure upgrade. To be private, this is an upgrade of Trumps power. He can use his business talent to do business for the country while in the White House. If the situation allows, the fund will naturally become the main source of funds for the strategic reserve of cryptocurrencies. This situation is not entirely my imagination. The main leader of the fund, Lutnick, the nominee for Secretary of Commerce, was the CEO of Cantor Fitzgerald, one of the custodians of Tether, and was responsible for the reserve of related assets. In addition, Lutnick is also a supporter of Bitcoin. It is not uncommon for him to be responsible for the planning of the sovereign fund to pave the way for Trumps crypto family and the interest network behind him. In addition, most sovereign funds are currently registered in offshore financial centers such as the Cayman Islands and Luxembourg. They can also conduct secret operations by taking advantage of the exemption of investment information disclosure under local laws. For example, the Saudi Public Investment Fund (PIF) holds 320,000 bitcoins through offshore shell companies, and its operations are completely out of the control of sovereign balance sheets. The regrets of Trumps 16-year term may be fully made up in this term.
Regarding the source of funds, there are only four points: earning, selling, financing, and printing. Based on the current situation in the United States, the first two are the most likely. Trump hopes to fill the fund through tariff revenue, while the other way is to sell the $5.7 trillion in assets currently held by the federal government. Of course, it doesn’t matter which way the fund is established in the end. We just take a glimpse of the ideal fund size. If this comes true, there are only three main core points: 1. Government purchases will become a fact; 2. American-style encryption projects will be the most important or even the only Alpha in the future currency circle; 3. Whether top projects accept sovereign funds will be a matter of survival.
3. Surrender?
Binance has made two big moves this month. One is to join hands with the UAE royal family and obtain an investment of up to 2 billion US dollars from the sovereign fund MGX. It is rumored that the United States has also discussed investment matters with Binance. The Wall Street Journal even bluntly stated that CZ is suspected of exchanging equity for pardons from the Trump family. Second, BSC is seamlessly embedded in its own CEX, which means that CEX users can use stablecoins to seamlessly participate in BSCs on-chain transactions. The problem reflected by these two actions is that traditional finance and geopolitical forces have systematically incorporated encryption, and secondly, embracing centralization seems to be the only way out for public chains. Encryption is being divided up by various countries. Public chains can either choose to embrace the powerful or be embedded in CEX to distribute through flow valves to become bigger and stronger.
Ethereum, which has chosen nothing, still maintains its arrogant attitude, and the exchange rate with BTC is constantly creating new lows. The doubts about Ethereum Foundation and Vitalik have lasted for almost a whole year. But from my personal perspective, the survival and even counterattack of Ethereum are crucial to encryption. There are only two ways in the world now, submission or resistance.
Those who surrender can share the glory with the powerful and have a moment of peace. But what kind of Web3 is it that cedes five cities today and ten cities tomorrow, and constantly transfuse blood to the centralization? One day, the seven kingdoms will belong to Qin. Although Ethereum has a strange dictator, it is the only public chain that deserves the term decentralized ecology. Yes, even today. I am not a loyal supporter of Ethereum, but I don’t want it to become the encrypted Handan City. The so-called value should be the code beating on the block, not a signature on the White House executive order.
