Stockpiling Cryptocurrencies

Just when you thought things couldn't get any weirder, this past Thursday, Der Furor issued an as-yet unnumbered royal proclamation executive order establishing a "Strategic Bitcoin Reserve" and a "U.S. Digital Asset Stockpile."

As I've freely admitted many times before, you could put everything I know about economics into your navel and still have room for a herd of elephants and a brass band. Nevertheless, I think that the concept of a "strategic bitcoin reserve" or a "digital asset stockpile" is stupid. To paraphrase the immortal words of Dorothy Parker, "This isn't just plain terrible, this is fancy terrible. This is terrible with raisins in it." 

Allow me to explain ...

Major currencies like dollars, euros, or pounds are known as fiat money, defined by Investopedia as 

"a government-issued currency that's not backed by a physical commodity such as gold or silver. It's backed by the government that issues it. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government* rather than the worth of a commodity backing it."

According to Investopedia, there are six attributes a fiat currency needs to have to be acceptable for exchange:

Durability - it must stand up to use;

Portability - it must be able to be moved around as needed;

Divisibility - it must be conveniently divisible into smaller units as needed;

Uniformity - each unit must look like and have the same value as every other unit;

Scarcity - the value is shored up by limits imposed on the quantity available; and,

Acceptability - users both at home and in other countries agree to take it as payment.

One can argue that Bitcoin, as the major cryptocurrency available today, meets all six of the attributes of a fiat currency except one: durability.

There is no such thing as a physical Bitcoin (or any other cybercurrency, for that matter), as there is with, say, a dollar bill. If you put a dollar bill into your wallet today, it will stay there until you take it out. A Bitcoin, however, does not exist in the real world ... it is nothing more than a collection of electronic signals stored in a blockchain on a server somewhere. As long as that server is running, you can argue that the Bitcoin is more or less durable, but if the power goes out, what happens? That dollar bill is still in my wallet, but where's your Bitcoin? As the Investopedia article says, "a bitcoin can last as long as there is a digital area for it to be stored in."

Oops.

Oh, and by the way, the creation and storage of cryptocurrencies requires enormous amounts of energy. According to an EnergyStar report titled The Energy Cost of Cryptocurrency, 

"Buildings used to house cryptocurrency mining can create a massive strain on local electricity grids, with a single crypto transaction consuming more energy than that required to power 6 houses for a day in the U.S. The estimated global annual energy consumption of the current cryptocurrency market is over 68 TWh, equivalent to more than 19 coal fired power plants operating continuously. Due to the technical nature of blockchain, this number is projected to grow to 100 TWh annually."

I don't know how much all that electricity costs and who would be paying for it** to create and maintain a "Strategic Bitcoin Reserve" or "Digital Asset Stockpile," but it's got to be more than the cost of printing good old greenbacks ... according to the Federal Reserve, it costs 3.2 cents to print a $1 bill, skyrocketing to 9.4 cents for a $100 note***. And the electricity to keep that cryptocurrency alive has to run 24/7/365 at staggering cost, while that humble dollar bill will last an estimated 6.6 years in circulation, and the Benjamin will last 22.9.

So, I think cryptocurrencies are a waste of real money and a scam designed to enrich people who have managed to create and market their own cryptocurrencies ... like Der Furor, whose "$Trump" was worth, at the time of this writing, $0.01144. In true fashion, Der Furor's personal cryptocurrency earned him millions in transaction fees while producing losses for small investors. It's been characterized as a classic "pump and dump" scheme for personal enrichment.

Forget cryptocurrencies. Invest in something real and lasting, like swampland in Florida, or the Brooklyn Bridge.

And if you need a laugh after thinking about being scammed by a president more interested in lining his pockets and getting revenge on his enemies than in taking care of your Social Security, Medicare, Medicaid, education, health, and civil rights, here's something for you: The Crypto Bullshit Generator.

Have a good day. More thoughts coming at no charge to you - digital or physical.

Bilbo

* The key words here are "the stability of the issuing government." Given the ongoing chaos unleashed by President Musk and PINO Der Furor, one has to wonder how long our government can be considered stable enough to guarantee the value of the dollar. But that's a discussion for another day.

** If you guessed you and I as taxpayers, you'd be right.

*** As I noted a few days back on my Facebook page, Texas Republican congressman Brandon Gill has introduced legislation to put the Orange Airhorn's picture on the $100 bill. Too bad. It misses a great opportunity to put his profile on a wooden nickel.

P.S. - I'm far from the only one who thinks crypto's a scam ... check out Noah Berlatsky's unsparing critique on Public Notice.

B.