we are so back we're back we're back SEC chair Gary gendler is as good as gone and the anti- crypto Army is a rabble in full Retreat the new president- elect is a defi founder who made a spectacle of buying hamburgers with BTC nothing is farfetched anymore but among all of the pro crypto policies that are now on the table there is one final boss towering above them all and that is the creation of a Federal Bitcoin Reserve it's the stuff of Legend but will it ever happen What would be its purpose and would it be good news for the rest of us stay tuned to find out now what does it mean for us when our governments start accumulating Bitcoin it sounds Mega bullish for the price of BTC that's for sure but it's worth considering what other implications this might have for crypto and for the world so to set the scene we'll begin with a little bit of background through throughout history governments and rulers have been preoccupied with accumulating treasure to be a sovereign is to have a monopoly on violence and to accomplish this you need more wealth than anyone else now the quintessential treasure is gold whose scarcity desirability durability and liquidity give it Universal value Sovereign entities have accumulated gold to consolidate power to meet the costs of Waging War and to support the value of national currencies the history of money is mostly a story of gold becoming concentrated in the hands of governments Once Upon a Time commercial Banks issued their own paper money that was redeemable on demand for gold held by the bank but as economies grew more complex and interconnected governments saw a need for a central institution to regulate the supply of money and public debt during the Industrial Revolution most national gold reserves shifted from commercial to Central Bank commercially issued paper money was largely replaced by paper money issued by the central bank this made commercial Banks dependent on the central bank to redeem depositor demands central banks generally operated with a degree of independence from direct government influence this meant the ability of a government to manipulate the national currency to meet its economic objectives was constrained but this all changed in the 1930s when governments around the world took drastic measures in response to the severe economic instability caused by the Great Depression during the Depression public confidence in Banks collapsed leading to runs on those Banks consequently people started hoarding gold leading to fears of a run on gold itself and a depletion of the national gold reserves so the United States government responded in 1933 by outlawing ownership of gold for investment purposes this meant that dollars were no longer convertible for gold effectively ending the gold standard domestically although the US continued to honor gold convertibility for international trade citizens were ordered to surrender their gold to Banks who were ordered to surrender it in turn to the Federal Reserve which was then in turn ordered to surrender it to the treasury and thus the Strategic gold Reserve was born the gold Reserve Act of 1934 not only empowered the treasury to appropriate the gold Supply but also to determine its price once the nation's gold was centralized in the treasury's hands it raised the value of that gold by 70% against the dollar thereby increasing its monetary base without acquiring more gold by devaluing the dollar the government increased its own purchasing power and made American exports more competitive abroad then after World War II the Breton Woods agreement established a modified gold standard for international trade under this agreement the value of the dollar was pegged to gold and the national currencies of some 40 other countries were then pegged to the dollar these countries would hold dollars in lie of gold as Reserve assets and they would be able to redeem their dollars for gold upon request the United States thereby became the world's central bank now this period was the height of American Imperial power and the US government was printing enormous sums of money to fund its various Wars around the world all this new money was supposed to be pegged to gold at $35 an ounce but the treasury wasn't able to print new gold to keep Pace with the money supply several of the parties to the Breton Woods agreement were not happy about this Arrangement they felt that their currencies were undervalued against the dollar because whereas the us could just print new money out of thin air they would have to acquire more US dollars if they wanted to increase their own monetary base this discontent ultimately led to a global run on the US Treasury whose gold reserves were rapidly depleted when Breton Woods came into Force the US had around 20,000 metric tons of gold in its vaults but by 1970 this had fallen to around 8,000 metric tons so in 1971 President Nixon said to heck with it and suspended the convertibility of the dollar into gold effectively ending the bretonwood system and replacing it with the fiat currency system that we all know and uh love ever since governments have been free to print as much money as they want and its value is left up to Market forces hey everyone sorry to interrupt the video but I just want to very quickly tell you about the coin Bureau deals page this is the place where we put together all the amazing deals and promos that we're able to offer you guys exclusively as viewers of this channel head on over and you will find such things as discounts on Hardware wallets some seriously impressive trading fee discounts on some of the best exchanges as well as some frankly mindboggling signup bonuses for some of those exchanges too the link is down below check it out when you have a moment thank me later and now back to the video 50 odd years on gold now accounts for only a small percentage of the US treasury's Reserve assets as of January 2024 us Reserve assets were valued at $242 billion of which gold accounted for only $ 11 billion or around 4. 5% almost 70% of us Reserve assets are special drawing rights or sdrs which are an international Reserve asset created by the international monetary fund or IMF in 1969 sdrs are a form of credit whose value is pegged to a weighted basket of five major currencies the weighting is reviewed every 5 years and the last update in 2022 set the weights at 4 3% for the US dollar 29% for the Euro 12% for the Chinese Yuan 8% for the Japanese Yen and 7% for the British pound the waiting is based on each currency's Global usage in international Capital markets and transactions this explains why the Euro's waiting is more than double that of the Yuans despite China having an economy considerably larger than the EU now like Fiat currencies themselves sdrs are not backed by any physical asset they're just credit notes whose value is based on the collective agreement among IMF members that sdrs are usable for official transactions such as currency exchanges between member countries in other words sdrs rely on global trust in the IMF and the stability of the currencies in the basket but in the current geopolitical climate these fundamentals are looking more precarious than ever for example the US China relationship has been steadily worsening since the beginning of the current trade war in 2018 bloody wars in Europe and the Middle East are escalating displacing entire populations spreading to New Frontiers and drawing in more and more participants in a time of great uncertainty the only thing that is Promised seems to be climate breakdown which is going to make everything much worse meanwhile the US national debt is spiraling out of control and everyone knows that it's just going to inflate the debt away and devalue the dollar in the process the of the brics Nations and the dollarization movement say a lot about the decline of us aemy the bricks Club is growing and openly pursuing objectives that run counter to Washington's interests and history fans will know how remarkable it is that they made it this far without any of their leaders suddenly popping their clocks and if the new potentially gold-backed currency proposed by the bricks sees the light of day and reduces dependence on the dollar it could undermine SDR value to some extent and for more about what the bricks are getting up to check out our video on its recent Summit which is linked to down below so tldr there are plenty of risks threatening the US and its Reserve assets hence the Strategic gold Reserve now its whole purpose is to hedge against uncertainty inflation and risks of all stripes in the era of fiat currency gold is a portfolio diversifier whose properties mitigate exposure to the downside risk of investment assets and cash equivalents like drrs but as some clever clogs have noticed we now have an asset that does this job much better an asset that not only protects against losses in times of macroeconomic stress but actually thrives in those very conditions that's right it's digital gold sort of now we like this moniker but it doesn't accurately reflect btc's unique properties unlike gold BTC can be bought and sold immediately by anyone anywhere at any time this makes it the most liquid major asset there is as a result it functions as a kind of liquidity alarm Bell when news of some macroeconomic Shock breaks BTC dumps faster and harder than other major assets this prompts naysay to say it's failed to do its job as a gold substitute however BTC also recovers much faster than other major assets and typically continues to Rally as though nothing had ever happened it has done this time and time again again during major and longlasting crises of all kinds as such btc's risk and return drivers are starkly different and in many cases inverted versus most traditional investment Assets Now if this is news to you we recommend checking out our video on black Rock's investment thesis which is linked to down below anyway gold on the other hand tends to do very little trfi investors lost their minds watching it rally by 28% since the start of the year that's a crazy year for gold but in the long term it doesn't really appreciate in value over the last 15 years gold has returned an inflation adjusted compound annual growth rate of 3. 8% for BTC it's 129.
2% not to put too fine a point on it but BTC is the best performing asset of all time it outperformed every other major asset class for seven out of the Lar 10 years for the other three years it was famously the worst performing asset and given the cyclical nature of btc's price expansion and contraction it wouldn't be too difficult for a central bank just to buy low and sell high if it was so inclined now of course we're preaching to the choir here this isn't news but to think that the US government could get orange pilled and start stacking SATs in a federal BTC Reserve now that is a new one if you told me this time last year we would be making this very video I'm not sure I'd have believed you but here we are back in July Donald Trump spoke at the Bitcoin conference in Nashville where he pledged to treat the government's BTC Holdings as a quote strategic National Bitcoin stockpile and for anyone who wants the us to have a BTC Reserve this was tantalizing however Trump's pledge was merely that the government would not sell any more of the $213 , 297 BTC it currently holds having confiscated it mostly from the silkroad darknet marketplace that is a great start and gives us one fewer bearish scenario to worry about we're glad to see the US won't be paper handing the bottom like a certain midwit government which actually imploded upon contact with Trump's reelection not naming any names of course anyway the thing is not selling government held BTC and establishing a strategic BTC Reserve are two different things Trump has not said he would do the latter but never fear because everyone's favorite wyomingite is here and she is determined to get the job done that's right Senator Cynthia lumus has proposed a law to create a federal Bitcoin purchase program under which the US would buy up to 1 million BTC over the next 5 years this would bring the government's Holdings to more than 1. 2 million BTC or 5. 7% of the max supply of course the max Supply doesn't account for the roughly 5.
7 million BTC that are lost or in satoshi's wallet if we exclude this portion then the total Supply is more like 15. 3 million BTC the US government would therefore control 8% of the BTC Supply lumus claims that the US will be quote debt-free because of Bitcoin but this seems like wishful thinking because the US national debt is almost 36 trillion dollar to repay this with Bitcoin the treasury would have to accumulate all 21 million BTC and sell the entire Supply at $1.
