Ones, zeros, and an expensive illusion

The Trump Administration’s recent executive order establishing a Strategic Bitcoin Reserve invites comparison to the nation’s Strategic Petroleum Reserve or even the fabled gold hoard at Fort Knox. But any such comparison quickly collapses under scrutiny. Oil and gold are tangible, essential, and carry intrinsic or at least historical value. Bitcoin, in contrast, is a digital abstraction – ones and zeros on a ledger – and without market demand, that’s all it is: ones and zeros.

The White House claims the move is intended to position the United States as a leader in digital asset strategy. Others suggest it will somehow help pay down the national debt or shore up the dollar, but as George Selgin of the Cato Institute points out, these justifications are not so much numerous as they are desperate. A speculative asset whose value fluctuates wildly from week to week – and which has no underlying economic utility – makes a poor foundation for national fiscal strategy.

Bitcoin’s defenders once saw it as a decentralized challenge to government-issued currencies. Now, some of the same voices cheer the government’s embrace of it, hopeful it will drive prices higher. That pivot alone should raise red flags. This isn’t about innovation or fiscal prudence. It’s about speculation dressed up in patriotic garb.

A “strategic” reserve, by definition, should serve a strategic purpose. Oil keeps jets flying. Gold, at the very least, has a centuries-old symbolic connection to currency. Bitcoin does neither. It is not legal tender, cannot be spent at scale in any meaningful way, and cannot be used in times of war or crisis. It is an investment vehicle – one that rises and falls with the enthusiasm of online traders and the whims of billionaire influencers.

Some have proposed even larger investments. The recently reintroduced BITCOIN Act calls for a million-coin reserve, funded by monetizing the gold in Fort Knox. Another proposal from the 2024 campaign trail called for four million coins – roughly a fifth of the total number that can ever exist. These aren’t plans grounded in economic strategy. They are moonshots, banking on the hope that Bitcoin’s value will skyrocket, with the taxpayer left holding the digital bag if it doesn’t.

In fact, if the government is determined to modernize its relationship with currency, perhaps it would be wiser to consider something more pragmatic – like a digital alternative to the penny. With copper, nickel, and zinc costs far exceeding the face value of the coin, a secure electronic replacement would offer meaningful savings and streamline commerce without exposing the public to extreme financial risk.

Strategic investments require long-term vision and sober risk analysis. The Bitcoin initiative appears to offer neither. It is, in essence, a speculative bet using public resources, based on a technology whose primary value is whatever someone else will pay for it tomorrow.

The U.S. government should not serve as a hedge fund for cryptocurrency enthusiasts. Let investors take their chances with Bitcoin if they wish – but do not pretend that ones and zeros make a stable foundation for national strategy.