Why the US Government Plans to Buy 1 Million Bitcoin

• This afternoon I'm laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower.
• The United States of America is planning to buy 1 million bitcoin as part of a new bill called the Bitcoin Act of 2024.
• The Bitcoin Act mandates that all bitcoin held by any federal agency must be transferred to the treasury to be held in a strategic bitcoin reserve.
• Currently, the US government already owns roughly 207,000 Bitcoin due to seizures from criminal activity.
• The bill proposes that the Secretary of Treasury purchase bitcoins and use it as economic leverage against China and Russia.
• Questions arise on whether this strategy represents innovation or desperation for America.

This afternoon I'm laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower. Since his electoral victory, Trump's transition team has tapped people championed by the crypto industry to lead various agencies.

This video is brought to you by Aura. The United States of America is planning to buy 1 million bitcoin. That's around 5% of the total remaining bitcoin supply. This idea comes in the form of a new bill called the Bitcoin Act of 2024.

A lot of people out there are wondering, is this really a good idea? And hang on, how did America even get to this point? This all seems a bit out of nowhere, doesn't it? A question that people want to ask is why? Why do this? Will America become the leader in digital finance, or are we witnessing peak stupid?

In this episode, we'll answer those questions and see what's in the bitcoin bill. You are watching Cold Fusion TV.

Firstly, it might surprise a lot of you to find out that the US government already owns roughly 207,000 Bitcoin. With a price of US$100,000 per coin, 207,000 coins is a mammoth amount of locked-up value. The Bitcoin Act, which is actually an acronym for this, mandates that all bitcoin held by any federal agency must be transferred to the treasury to be held in a strategic bitcoin reserve.

But there is a question here though. How on earth does the US government already have so much bitcoin?

Well, it's simple: Bitcoin seizures due to criminal activity. Interestingly, around 144,000 of the seized bitcoins were from one guy, Ross Ulbricht, AKA Dread Pirate Roberts. He was the founder of Silk Road, a dark website that sold narcotics for bitcoin.

A US man was able to hide behind a false identity, operating a sophisticated illegal drug website. The site operated much like eBay, allowing users to buy and sell illegal drugs, guns, and even hire hitmen. The FBI spent two years trying to find the man behind the site. In 2013, Ulbricht was ambushed in a library while he was working on his laptop.

Unfortunately for him, he didn't get a chance to turn off the laptop before being arrested. So the FBI had unencrypted access to all of his coins. The way the FBI operated was to get that computer while it was open and running as quickly as possible.

If you remember my Silk Road episode from a few years back, you know the story. But back to the Bitcoin Act.

This Bitcoin bill isn't just about relocating seized bitcoins. It's a lot more than that. Here's what the Bitcoin Act is at a glance:

• It mandates that the Secretary of Treasury purchase not more than 200,000 bitcoins per year over a five-year period for a total acquisition of 1 million bitcoin.
• The 1 million bitcoins is then to be held by the treasury for at least 20 years before any selling can take place.
• There's also other restrictions on sales.
• The bill also mandates that the first 6 billion of earnings of the Federal Reserve banks each year has to be used to purchase Bitcoin for the strategic reserve.

Next is the most significant part of the bill: exchanging gold reserves for bitcoin. Well, kind of. In the media, there's a lot of talk about the US Government selling off its gold to buy bitcoin—an absolutely harebrained idea.

But as far as I can tell, this isn't technically true. The government will be selling gold certificates to buy bitcoin.

So how does that work? Currently, the US government supposedly has a stockpile of about 8,133 metric tonnes of gold in Fort Knox and other vaults. The thing is, the gold held by the US government is valued at $42.22 per ounce, or about 11 billion dollars in total. It's been stuck at that value since 2-12-1973.

But today, the market price of gold is around $2,700 per ounce. That's over 70 times higher, for a total of approximately 775 billion.

So, the treasury will issue new gold certificates or claims of gold based on the current market price. They'll exchange those certificates for dollars and use the resulting cash—about 775 billion—to buy up the bitcoins.

So no physical gold is actually being sold, just the gold certificates. The United States stopped publicly issuing gold certificates officially back in 1934, so reviving the concept is certainly interesting.

Senator Cynthia Loomis, who introduced the bill, tells Bloomberg we already have financial assets in the form of gold certificates to convert to bitcoin. So the effect on the US balance sheet is pretty neutral, meaning this is supposedly at no expense to US taxpayers.

Okay, so that's the bill. But what's the point of doing all of this? Up next, in this episode, we will see why America is doing this, how the nation got to this point.

Also, exploring if this is a good idea, and we'll see what happens next. But before we continue, let's hear a quick word from today's sponsor, Aura.

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Now back to the episode.

The way the US Government is thinking about this is as Bitcoin's value may be volatile over the short term, but over the long term, its price has always moved in the same direction—up.

There's only a limited supply of Bitcoin out there and eventually, they'll all be mined. If America holds onto an appreciating asset on its balance sheet, the presumed appreciation in value would help reduce the national debt.

After all, the government can't print more bitcoin. The aim of the bill is to reduce the federal debt by 50% within two decades by using Bitcoin.

There's also a geopolitical component. It's a reaction to the BRICS nations trying to get away from the US dollar. Right now they're dumping US Treasuries for physical gold.

According to Fortune, America could use Bitcoin as economic leverage over China and Russia. We don't want China or anybody else— not just China, but others are embracing it, and we want to be the head because Bitcoin is potentially a strategic reserve asset for the US government crypto reserve.

But then last week, we heard Vladimir Putin talking about it. We want to ensure that the US remains the world's global reserve currency. If Bitcoin can be an adjacency to that and help support that proposition, then, I think there's a logic to that.

Michael Novogratz, head of the crypto investment firm Galaxy Digital, told Bloomberg that if the US does create such a stockpile, the price could rise to half a million dollars per token.

His reasoning is that other nations will feel the need to create their own stockpiles. Fortune magazine writes that the game theory dynamics of nation-state adoption would spark a digital gold rush, slowing and even possibly reversing the flight to physical gold.

US policymakers could thereby use Bitcoin as a tool of economic statecraft, counterbalancing China's and Russia's attempts to move away from the dollar towards precious metals. And which country's balance sheet would benefit the most in this scenario? The United States.

But in all of this, you can see the conflict of interest here. If someone holds a lot of Bitcoin, they'd want this to go through so the price can shoot up and they can cash out. But regardless, things seem to be moving ahead.

Just as I was writing this, Texas also announced a bill to use Bitcoin as a strategic reserve. The U.S. isn't the first to seriously look into Bitcoin as a national financial asset. Back in June of 2021, under President Naive Bukele, El Salvador approved a law to make Bitcoin legal tender alongside the US dollar to promote Bitcoin adoption amongst the masses.

Citizens who downloaded the Chivo wallet received $30 worth of Bitcoin. By February 2022, a study from Yale reported that 68% of households were aware of the Chivo wallet and 78% of those had downloaded it. The country now holds over 6,000 bitcoins in its reserves. That's around 1.6% of the nation's $36 billion GDP.

With El Salvador, Russia, and now the US either talking about or integrating Bitcoin into their financial systems, are we seeing the start of something, or is this all just hype? Seeing that the Bitcoin price is bullish right now, it's going to be interesting to see how this plays out.

So how did the United States get to this point in the first place? Well, the Bitcoin bill was introduced by Sen. Cynthia Loomis on July 31, 2024, and since then it's gathered steam. Cynthia purchased her first Bitcoin in 2013 after her son-in-law advised her to do so. She became the first US Senator to own cryptocurrency.

Her enthusiasm for the technology led her to be known as Congress's Crypto Queen. But the rabbit hole goes a bit deeper. You see, during the 2024 election, the crypto industry was the biggest spender of any sector. The industry donated a total of $200 million to both candidates.

So, it's not a stretch to say that their influence must have had a part to play in the positive reception of bitcoin politically. But as for the public, things are a bit different. Platforms such as Pump Fun, a crypto website where anyone can make their own coin in seconds, have seen viral scams like a little kid rug pulling $50,000 or the infamous Huc to Coin.

I don't have to tell you that the crypto industry doesn't have the best reputation right now, as people often conflate crypto scams and rug pulls with bitcoin itself.

So we do have to ask ourselves an important question at this point: What is the function of bitcoin? Is it a medium of exchange or a store of value?

It seems like in the past decade or so, the consensus has settled on it being a store of value compared to other forms of crypto out there. The transactions are slow and compared to regular bank transactions, Bitcoin is expensive.

So it's not a very good medium of exchange, but it has acted as a store of value over the long term. In fact, around 70% of bitcoins have not moved in the last year, so most people are using them as a kind of savings.

And to top it off, in early December, Federal Reserve Chair Jay Powell noted that Bitcoin is not a competitor to the dollar; it's a competitor for gold. People use Bitcoin as a speculative asset, right?

It's like gold; it's just like gold, only it's virtual, it's digital. People are not using it as a form of payment or as a store of value. It's highly volatile. It's not a competitor for the dollar. It's really a competitor for gold.

Now, of course, gold has industry applications and others even outside of that. But I guess just in a strict financial sense you can see where it's coming from, as Bitcoin was originally designed to mirror gold.

But there's a major glaring issue here. Bitcoin is still a risk asset. The price could go to zero. Anything is possible.

So is this a good idea? For Bitcoin to be a financial reserve asset for the largest economy on earth, it has to stand the test of time. Is 16 years really enough? Jennifer J. Schop, director of Financial Regulation Studies at the Cato Institute's Research for Monetary and Financial Alternatives, tells Bloomberg it's still putting government money on the line, and Bitcoin has not shown itself to be a particularly stable asset.

The bill asks senators and members of Congress who may not understand crypto that well to make a much bigger leap of faith in terms of long-term viability.

But let's take a step back. A lot of you who have been following Bitcoin from the beginning may have some alarm bells going off. Doesn't all of this go against the original tenets of Bitcoin? Bitcoin was a response to the banking system screw-ups and government bailouts of 2008.

It was an alternative system to get away from the traditional banking system. But now the government is using it as an asset. Doesn't this open the door to corruption? In the future, they could easily amend the Bitcoin bill and print dollars to buy as much Bitcoin as they need.

Could Bitcoin be captured? We don't know. But for now, it seems like the US government might be piggybacking off a novel financial asset that's already in use instead of building their own.

Now there are some out there that say that this is the precursor to the CBDC or central bank digital currency, something that the Federal Reserve has been working on for a while. But that's all a story for another day.

Now, this next statement is just my personal view, as someone who's made my first deep dive video into Bitcoin back in 2013. I think the intrinsic value of Bitcoin is virtually zero. It is just a risk asset as it stands.

But that being said, I think the real value of Bitcoin is the network. That's the blockchain and its cryptographic distributed nature. It has proved itself unhackable and a totally trustless system.

I'm not talking about scammers using Bitcoin to commit fraud because scammers also use dollars to commit fraud. I'm talking about the actual value of the underlying technology and the network effect.

Sure, there are far better crypto tokens out there, but does the average Joe know their name? No, but everyone knows Bitcoin.

So what's next? Once the bill passes the Senate, it's going to need support from the House of Representatives. You could imagine how more lobbying from the crypto industry could help here. But interestingly, there has been some bipartisan support.

For example, Democrat Ro Khanna has supported this bill in the past. So is the Bitcoin Act of 2024 likely to fully pass? Well, that's a question for the future. But the betting odds on Polymarket give it a 30% chance.

And that's the crux. There's a lot of hurdles with lawmakers, regulations, public distrust, and opposition to jump over before this is a reality.

But with the right amount of lobbying from the crypto industry, it could very well happen. We'll have to wait and see for both efforts on this, both on the federal level and what's happening in Texas.

So in conclusion, is this innovation or is this a sign of desperation for America? Instead of rebuilding manufacturing or making the economy more productive, is America taking the easy way out and manufacturing paper wealth creation through financial engineering?

Or is this innovation, a digital currency that's the future, and America is just being smart by realizing its utility? From where we stand in time today, we can't truly answer that. But one thing is for sure, this is all very fascinating—risky but fascinating.

And that's where we are with the Bitcoin Act of 2024 and America pledging to buy 1 million bitcoins.

So what do you guys think? Do you think that this is a good idea or not? I'll be interested to hear your thoughts in the comment section below.

So thanks for watching. I hope you learned a thing or two or enjoyed that. And if you're new to Cold Fusion, feel free to subscribe.

There's plenty of interesting stuff here on science, technology, and business. So my name is De Gogo, and I'll catch you again soon for the next episode. Cheers guys. Have a good one. Cold Fusion, it's new thinking.