On November 5, 2024 the citizens of the United States elected Donald J. Trump to his second presidential term. Trump’s victory was resounding and Republican’s gained control of the Senate and the House. While Trump’s victory is less than 10 days old, he has already started to follow through on several campaign promises. For example, Trump recently announced he planned to appoint Tom Homan, an individual who has a no-nonsense approach to border enforcement, as border czar. All indications point to Trump following through on his campaign promises which should not be a surprise given his first term.
While Trump’s promise to shut down the border was a central promise of his historic victory, a less known campaign promise came to the Bitcoin community. On July 27, 2024 President Trump spoke for 45 minutes at the Bitcoin Conference in Nashville. During the speech and at other speeches during his campaign, Trump promised the following items to the Bitcoin community:
- Creating and Maintaining a Strategic Bitcoin Reserve – This is by far the most far-reaching promise and would undoubtedly have ramifications on the global economy. What many people don’t know is the United States already has the largest Bitcoin position of any country. The United States government currently owns 207,000 bitcoin which it has accumulated through seizures during prosecutions through the years. The country with the second largest holding is China (194,000 bitcoin), followed by the United Kingdom (61,000 bitcoin), Ukraine (46,000 bitcoin), the Royal Government of Bhutan (13,000 bitcoin), and, last, but not least, given the country’s commitment to bitcoin adoption is El Salvador (5,750 bitcoin). While Trump did not publicly expound on his plans and what the strategic reserve may look like, the United States having a strategic bitcoin reserve would forever change the landscape of the industry.
- Firing SEC Chairman Gary Gensler – Gary Gensler has been a thorn in the side of the crypto industry at large and many believe he has thwarted many crypto and bitcoin companies achieving success through regulatory enforcement despite the rules being far from clear. While many industry leaders have asked for a framework for compliance, the guidance on how to operate in the space has been almost nonexistent. Few, if anyone in the industry, will be sad to see Gary Gensler go. President Trump has promised to fire Gary Gensler on day one of his second term.
- Supporting the Bitcoin Mining Community – Trump said he wanted all the remaining bitcoin to be mined and minted in the United States of America. This goal is completely unrealistic and literally impossible to achieve. However, the Bitcoin mining community will be essential as the United States builds out its power supply capacity to support the ambitious power needs of AI projects. As we have previously thoroughly written about, Bitcoin miners can efficiently use excess power in the grid which would otherwise be problematic.
- Opposing a Central Bank Digital Currency (CBDC) – A CBDC is the antithesis of bitcoin. In the nightmare scenario of a CBDC, the government could restrict how its citizens could use the citizen's “money.” The government could restrict things such as meat consumption, purchases of guns, or really anything the government did not want its citizens to consume. While the government can control the on and off ramps of bitcoin, controlling transactions on chain is more daunting if not impossible. Trump has been clear he will not implement a CBDC.
- Commuting the Sentence of Ross Ulbricht, the founder of Silk Road, to Time Served – Ross Ulbricht became a cultish figure in the Bitcoin community when he was finally taken down by the federal government after operating the Silk Road out in the open hiding behind the anonymity created by the TOR network. The Silk Road was a marketplace where users could buy and sell services of any kind with complete anonymity, or so the users thought. The Silk Road quickly gained popularity among those wishing to participate in the illegal drug marketplace both on the buyer and seller side. The currency the Silk Road used was bitcoin. By transacting in Bitcoin users were able to keep their identities masked from authorities. Due to an old post the government was finally able to unmask Ross Ulbricht, and after years of taunting government officials, the United States through the book at him during sentencing. Ross was sentenced to two life sentences plus 40 years, a sentence that was harsher than the sentence the United States handed down to El Chapo the famous Mexican Drug kingpin. While the intricacies of his case and evidence presented at trial are complicated and too long to discuss here, those who view prison as a place to reform individuals could argue the sentence was far too harsh. President Trump has promised the Bitcoin community he will commute Ross Ulbricht’s sentence day one of his second term. While this may not seem as important as the other promises, if Trump follows through, it will show his administration is serious about the United States embracing Bitcoin. I fully expect Ross to be a free man by the end of January 2025.
It is not just Trump who has taken a pro-Bitcoin stance, but also many who have joined forces with him. Trump’s vice president selection, JD Vance, disclosed in August 2024 he owned between 250,000 and 500,000 US dollars worth of bitcoin. Additionally, avid Trump supporter Vivek Ramaswamy is known to be an advocate of Bitcoin. Finally, and perhaps most importantly, prior to Trump speaking at the Bitcoin Magazine Conference in July, RFK Jr. took the stage at the Bitcoin Magazine Conference for the second straight year.
RFK Jr proposed a strategic reserve for the United States of four million bitcoin. Remember there are only 21 million bitcoin and many speculate at least five million coins have been lost forever. RFK proposed the United States add 550 bitcoin per day until the United States reaches its four million bitcoin position which would roughly align the United States with its gold reserve it had at a point in time assuming one does not factor in the lost bitcoin. Currently, there are 450 bitcoin mined per day and that number is cut in half with each halving. I’m skeptical this is a realistic goal but keep in mind this is just one country buying bitcoin. Once the United States starts buying, many other countries will follow suit.
Senator Cynthia Lummis has introduced the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act, which proposes that the United States create a strategic Bitcoin reserve by acquiring one million bitcoin over a five-year span. There is a strong likelihood this bill becomes law within the first 100 days of the Trump administration with bipartisan support.
Assuming this bill is proposing to add to the position the United States already has, 207,000 bitcoin, the United States would be buying 434.2 bitcoin per day. And, as discussed in the previous paragraph, there are only 450 new bitcoin mined per day and for the last 1.5 plus years of the United State accumulation strategy under this bill, which would occur after the next halving, only 225 new bitcoin will be mined per day! If the United States is buying, there will be many other countries buying.
Many individuals remain skeptical of Bitcoin due to a lack of research. However, a prudent investor would assign some probability to the United States creating a strategic bitcoin reserve and consider taking a position. I previously wrote two primers covering why Bitcoin is unique compared to other cryptocurrencies. The first article was published in the BenefitsLink Retirement Plan Newsletter on November 10, 2022 when the price of bitcoin was $17,500. The second article which updated the previous article's numbers regarding hash rate and other variables that had changed was published in the BenefitsLink Retirement Plan Newsletter on March 4, 2024, when the price of bitcoin was $66,500. Both of these articles (you only need to read one and I would suggest the latter) provide readers with a good summary of the nuances that make the Bitcoin protocol work. Everyone in the investment world needs to have a basic understanding of Bitcoin, a fact which is becoming more apparent with each passing day.
A prudent investor would allocate a portion of his/her capital to the most asymmetric, mispriced bet on the board. Almost everyone is underestimating the expected return of bitcoin over the next two years! Once it was understood that the mathematical and computer science principles that are the foundation of the Bitcoin protocol functioned properly, Bitcoin has always been as close to a sure bet that exists in the long-run. Due to events that have transpired over the last five years, the Covid pandemic, uncontrolled global inflation, and the United States electing a pro-Bitcoin president for the first time, Bitcoin's time to soar has been greatly accelerated. Admittedly, there is still a chance that Bitcoin goes to zero (you might also win the powerball if you play) for some unforeseen circumstance (such as a fatal error in the protocol), but there is also a chance Bitcoin overthrows the United States dollar and becomes the global reserve currency. In between those two extremes are a spectrum of Bitcoin’s success. However, short of the fatal error in the Bitcoin protocol scenario, almost all other scenarios lead to Bitcoin’s price going higher into the future. Allocate your assets accordingly.
