Is Trump's New Bitcoin Deal achievable?

On January 17, the Financial newspaper reported that bitcoin briefly broke through $102,000, and the market value of the global cryptocurrency market rose to $3.57 trillion, data show that as of January 17, the total market value of the global cryptocurrency market was $3.57 trillion, an increase of 2.20% from the previous day. Based on market expectations for the creation of a U.S. national reserve, the price of bitcoin has risen nearly 50 percent since the November election to surpass $100,000, and the price of bitcoin has more than doubled in 2024.

Why the Bitcoin rally? Trump's promise to the crypto industry is about to be fulfilled?

Us President-elect Donald Trump plans to issue an executive order that will make cryptocurrencies a national strategic priority, and plans to create a cryptocurrency advisory council to give crypto industry players a stronger voice in his administration, according to media reports citing sources familiar with the matter. For cryptocurrencies, this executive order will mean a big change.

But is Trump's new Bitcoin deal really achievable?

First, it is more difficult for the United States to own new bitcoins. The total number of bitcoin 21 million, has been mined more than 19.8 million, the remaining less than 1.2 million, mining energy consumption is getting higher and higher, competition is becoming more and more fierce, and its mining is decentralized, the United States is difficult to ensure that new Bitcoin can be generated in the United States, more difficult to ensure that it belongs to the United States government. At the same time, Bitcoin has an estimated 4 million unusable "death coins" and is increasingly controlled by a small number of people, and it is not easy to buy another 1 million. The United States takes the lead in buying bitcoin, which is bound to significantly increase the price of bitcoin, but it will also significantly increase its price bubble and collapse risk. In addition, the development of quantum computing technology will also make the security of cryptocurrencies such as Bitcoin face major challenges.

Second, the so-called national strategic reserve of Bitcoin, whether it is the strategic reserve of the government or the strategic reserve of the Federal Reserve as the dollar, carries risks and uncertainties. If it means government reserves, then the government's purchase of millions more bitcoins, on top of the 210,000 or so it has seized (of which there is a legal dispute over whether the portion taken by hackers or robbers should be returned to the victims), would drive the price of bitcoin sharply higher. At present, the US Treasury's Foreign Exchange Stabilization Fund (ESF) is about $215 billion, and even using the full ESF may not be enough. Additional debt issuance by the government would add to the already more than $36 trillion in federal debt. It is also uncertain to rely on the reselling of bitcoins to stabilize foreign exchange (stabilize the dollar) or pay off government debt after a significant appreciation, because a large-scale reselling would depress its price. If it refers to the reserve of the Federal Reserve, if the Federal Reserve buys millions of bitcoins with dollars, it will put a large amount of base money, which may bring more pressure on inflation. If the Fed replaces Bitcoin with gold reserves, it can weaken the impact on the base currency, but it may significantly lower the price of gold and push up the price of bitcoin, and there is a big risk that it can really benefit.

At the same time, we should also see that under the credit currency, the reputation of a country's currency is fundamentally based on the growth of the country's wealth and the level of money management, and no longer mainly depends on the value of reserve assets. Therefore, the exchange of gold reserves for bitcoin reserves is unlikely to have a meaningful positive impact on the dollar or be used to repay government debt.

Third, Trump's new Bitcoin policy contradicts his stance of strengthening the US dollar as the key global currency. Bitcoin is decentralized and super-sovereign, and even if the United States significantly increases its Bitcoin reserves, it will not help strengthen the international role of the dollar. On the contrary, if the extreme relaxation of bitcoin regulation allows large cross-border flows of sovereign currencies through Bitcoin, and prevents the digital development of the US dollar, it may have a serious impact on the international status of the US dollar.

The special status of the dollar as an international central currency is fundamentally determined by the comprehensive national strength and international influence of the United States. In the absence of fundamental changes in the world pattern of the United States as the world's strongest country, it is difficult to subvert or replace the status of the dollar as the number one international currency, unless the United States itself makes subversive mistakes and actively weakens the credit and status of the dollar. Once the international status of the dollar is replaced, it will have a huge impact on the United States.

To sum up, Bitcoin can only be a new tradable wealth or digital asset, it is difficult to become a real currency, can not replace sovereign currency at all, can replace gold as a national strategic reserve is still a big question. The international community should treat Trump's new Bitcoin deal calmly and objectively, and should not blindly follow the trend.