24 sats \ 5 replies \ @Solomonsatoshi 11 Aug \ parent \ on: Should the US Government Acquire a Bitcoin Reserve? • Listen on Fountain bitcoin
The USDs global reserve currency status was built upon the unique ability of the USD to retain its gold backing and the post WW2 dominance of the US economy globally.
Bretton Woods established USD dominance globally premised upon the gold backing of the USD.
Since Nixon decoupled the USD from gold and the USD went full fiat the USDs dominance has largely been maintained by the lack of any credible alternative.
Bitcoin at least theoretically presents a viable alternative to the USD.
As potentially does the Chinese CBDC Yuan.
For the US to start stockpiling Bitcoin would imply the USD is an inferior store of value to Bitcoin and would be a signal for other central banks to start also stockpiling Bitcoin.
This would accelerate the decline of the USD.
Maybe, but that logic cuts both ways. If the dollar is "backed" by bitcoin to some extent, then that lessens the need to get away from the dollar.
Take it to the extreme where the US buys enough bitcoin to fully back the dollar with 100% bitcoin reserves. Why would other countries ditch the dollar, in that case?
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There is no proposal to enable conversion of the USD into Sats. There was once the right to convert USD to gold.
Any proposal short of enabling conversion of dollars to Sats is an admission that Bitcoin is a superior SoV to USD...and thus accelerates devaluation of the USD.
The only thing supporting the USD for decades has been the need of other Central Banks to hold USDs for access to SWIFT and as reserves. If the USD declares it now sees BTC as a superior SoV the USD would very swiftly, collapse.
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My point is that if holding some bitcoin would accelerate the dollar's decline, then holding even more should be worse. However, if we go far enough, it seems clear that it would do the opposite and actually inspire confidence in the dollar.
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If you were to go to the extent of making the dollar redeemable for Bitcoin you are then admitting Bitcoin is a more secure and reliable SoV than the USD...
ie that the dollar needs such backing to maintain trust and faith in it.
Such an admission would undermine the dollar as its current status depends upon it being seen as a strong, reliable and highly liquid SoV.
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Who cares about "admitting" anything? Such a backing would clearly make it a stronger currency, given your other assumptions.
The rest of the world, if they see Bitcoin as a superior store of value, is not going to abandon the dollar because it's got too much Bitcoin backing it.
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