We consider the incongruency of a U.S. Strategic Bitcoin Reserve, the latest crypto exchange hack, and how most participants lost money on the Trump meme coin. Given all that, we review some areas where cryptocurrency is helping individuals and businesses.
Topics covered include:
- What is the U.S. Strategic Petroleum Reserve
- Why it makes little sense for the U.S. and individual states to create and participate in a Strategic Bitcoin Reserve
- What led to the latest and largest cryptocurrency exchange hack in history
- How financial and other data breaches impacted over 1 billion people last year, costing over $15 billion
- How quantum computers could disrupt the security of cryptocurrency and traditional financial systems
- Why most speculators lose money on meme coins
- What are some current ways cryptocurrency is helping individuals and businesses achieve greater financial stability and lower costs
Show Notes
All Information (Except Text) for S.4912 – BITCOIN Act of 2024—Congress.gov
House Bill No. 4087—Michigan Legislature
2025 South Dakota Legislature House Bill 1202—South Dakota Legislature
State of Arizona Senate SB 1025—Arizona State Legislature
Quantum computers and the Bitcoin blockchain by Itan Barmes, Bram Bosch and Olaf Haalstra—Deloitte
Cost of a Data Breach Report 2024—IBM
ITRC Annual Data Breach Report—Identity Theft Resource Center
Post by @realDonaldTrump—Truth Social
Memecoin scandal rocks Argentina’s Javier Milei by Ciara Nugen—The Financial Times
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Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 513. It’s titled “Crypto: Innovation or Insanity? Meme Coins, Hacks, and Strategic Bitcoin Reserves.”
Strategic Petroleum Reserve
For many years, the United States has had a strategic petroleum reserve. It’s the world’s largest supply of emergency crude oil, according to the Department of Energy. The oil is stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico, sometimes known as the Gulf of America. There’s capacity to store 714 million barrels.
The point of the strategic petroleum reserve is to sell oil competitively in the open market when prices are high. Increase the supply, because oil is used in the private sector for transportation, for other energy uses, and manufacturing. The supply of oil can be disrupted, such as in June 2011, when President Obama directed the sale of 30 million barrels of crude oil to offset the supply disruptions due to unrest in Libya.
Strategic Bitcoin Reserve
Last July, in the U.S. Senate, a bill was introduced to establish a strategic Bitcoin reserve. The point of the bill was to provide for the acquisition and storage of the cryptocurrency Bitcoin by the U.S. government. The bill would have the Department of Treasury purchase one million Bitcoins over a five-year period and hold the Bitcoins in trusts for the United States. They would be held for 20 years unless they were used to retire outstanding federal debt.
To me, this is an example of some craziness when it comes to cryptocurrency. Why does the U.S. need a strategic Bitcoin reserve? Is it to sell Bitcoin if the price gets too high, in the same way the strategic petroleum reserve is used? The U.S. has a fiat currency. It’s not backed by anything. Former Federal Reserve Chair Alan Greenspan testified in front of Congress in 2005, saying there’s nothing to prevent the federal government from creating as much money as it wants, and paying it to somebody. The U.S. is not limited when it comes to money creation.
Bitcoin is not something strategic, used in the U.S. or global economy. Although there are some uses, it’s not a strategic use. The U.S. government is pay-as-you-go. It runs budget deficits. A couple episodes ago we discussed sovereign wealth funds.
One of the categories of sovereign wealth funds or reasons for it were development strategic funds. The idea is to support the growth in the economy, and potentially generate financial returns through investments, but investments in the private sector in the economy, not through speculation on cryptocurrency. I gave the example of the Irish Strategic Investment Fund. It launched an infrastructure fund to invest in infrastructure.
Now, another type of funds, sovereign wealth funds, that we discussed was the economic stabilization and reserve funds. These are established by countries that run a trade surplus. Often, that trade surplus is due to large natural resources reserves. They’re selling oil, they’re generating a budget surplus, and some of those funds are saved to some type of sovereign wealth fund to be used in the future. But there’s a surplus being generated.
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