Election battle

Bitcoin and, by extension, cryptocurrency somehow finagled their way into a favorable position during the recent US election cycle. Bitcoin got both major American political parties to try and "out-support" or "out-crypto" one another. Republicans seemed to get the head start in the pro-bitcoin race. This was headlined by talks at Bitcoin 2024 in Nashville by candidates Donald Trump and Robert Kennedy Jr. and Senator Cynthia Lummis. Pro-bitcoin candidates started receiving a lot of support in terms of voters and a lot of money as well. No doubt, these facts motivated Kamala Harris to pivot and begin to speak in a more bitcoin and crypto-friendly manner.
Thinking back to exactly two years prior, in November of 2022 when the FTX situation blew up, bitcoin has come a long, long way. In the FTX fallout, the buzzwords were scams, thievery, funding terror, and the need for crackdowns, regulation, an "anti-crypto army" and Operation Choke Point 2.0. The climate and future was bleak.
Fast forwarding to the 2024 campaign, in essence, bitcoin had somehow positioned itself in the fortunate spot where both major parties and candidates were essentially competing to be the most pro-bitcoin. Skeptics may rightly say, "I hear the talk, but show me the results." Still, compared to a couple of years ago, this was and is a good place to be.

What if...

What if bitcoin could now finagle its way into a Bitcoin Cold War between the US and Russia and/or China or both? Or, what if bitcoin could get a cold war going between ANY and all other nations who wants to jump in?

Game theory

We learned in skool that the Prisoner's Dilemma (PD) was often applied to the old US vs USSR Cold War arms race. The nuclear arms race brought up this question: Why would rational nation-states spend billions to build immensely dangerous weapons with the whole intent of never using those weapons?
To be fair, the weapons were actually used...they were used to deter. They were not built with the intent to use as in firing the weapons, but they were built to deter the opposite side from firing theirs. So, in this way, they were in fact used. But, back to bitcoin...
President-elect Trump (and RFK Jr. and Senator Lummis) all spoke of a bitcoin strategic reserve or "stockpile" as Trump put it. (Sounds like nukes.) Russia and the BRICS nations have voiced the intent to create a currency to compete against the US dollar. Suppose Russia decided that bitcoin should be a part of that reserve currency. If Russia were to see the US buying bitcoin heading toward the goal of 1 million BTC as proposed by Sen. Lummis, the Prisoner's Dilemma may well kick in. Or, conversely, if Russia and BRICS were to move first on acquiring BTC, the US may see this as a very real economic threat and the Prisoner's Dilemma game theory would be game on.
In a way, the international game theory is already on. Bhutan has been mining bitcoin since 2019 and now holds over 12,500 BTC. El Salvador adopted bitcoin as legal tender in 2021. Since, they've been acquiring and hodling to the tune of just under 6,000 BTC. That's not huge, but it is 6,000 BTC and it's off-of-zero and that means...game on. What's more, the game may already be more widespread internationally than thought. This report estimates that nations hold 567,000 BTC (and it's outdated...notably with Germany having sold their BTC).
Bhutan and El Salvador are small countries getting a jump start and head start in the bitcoin cold war. If and when a larger nation with greater resources jumps in, well, we'll just have to see. Frankly, China and the US already might be in a bitcoin Cold War, see the image below:
But...numbers. The most critical number is 21 million. Another number is between 600,000 and 1.1 million BTC. That is the number of BTC that Satoshi Nakamoto apparently holds. And one other number is the 3.8 million lost-forever BTC. And that means scarcity.
So, 21 million, minus 850,000 that Satoshi holds (the mid-point between 600k and 1.1 M), minus 3.8 million lost, whittles the BTC supply down to 16,350,000.
If the US begins to pursue Senator Lummis' 1 million BTC goal, that would mean the US would hold 6.1% of all "liquid" bitcoin. As Russia or China or BRICS as a whole or every other nation saw that 16 million dwindling, the game theory FOMO would kick in hard.
I write FOMO because, with the Prisoner's Dilemma, a dynamic of we/they psychological gamesmanship ensues. The fear is that the other side WILL do something which will, in turn, slam our side in defeat. During the nuclear arms race, the fear was that the other side would build a massive nuclear stockpile. And, if our side did not stock weapons, they would then have a huge power imbalance over us. So, fearing this power imbalance, each side took the rational action and built the weapons.
The Prisoner's Dilemma usually is shown with "points" of some kind. The most ideal box would be box A with both side getting 100 points. But, due to fear of winding up in box B or C, we wind up in box D...clearly, not the best box.
With bitcoin, the fear would be that the other side might amass a stockpile of BTC. And, if we did not, then they would then have a huge economic power imbalance over us. So, rationally, both sides should begin to gather BTC to avoid such an economic imbalance.
Just like with the nuclear arms race, box D is the rational outcome in the Bitcoin Cold War.
With the hard-coded scarcity of bitcoin and with multiple players in the international game (not only the two players in the Prisoner's Dilemma), the numbers become not only an incentive to get and hoard BTC, but a flywheel of an impetus driving acquisition. There's one other factor that plays into starting a bitcoin Cold War: the US already has economic hegemony as it enjoys having the US dollar as the world's de facto reserve currency. This fact is exactly the motivation behind BRICS and its challenge to USD. Although BRICS may wish to create a CBDC of some sort, stockpiling BTC to back that CBDC still exists as a very real possible part of that plan. At this point, NOT doing so would almost be irresponsible.
What's more, time is at play as well. I'm reminded of Einstein's E=mc² which I don't understand. As my chipmunk brain figures, if a rocket was accelerating and getting close to the speed of light, it would take more and more and more energy to keep accelerating, this to the point where it would become impossible to finally reach that speed. So, it never gets there. This never-gets-there with BTC is because of (1) scarcity, of course, and (2) the market order book. Taking the US as an example, and if the US holds 200,000 BTC currently and wishes to get to Sen. Lummis' goal of 1 million, the States need to buy 800,000 more BTC.
However, it's not simply 800,000 times current market price. The more that is bought, the more the order book is gnawed away. The means the current spot market prices increases. I tried to estimate the amount of money that would be needed to buy 800k BTC given the current order book and market depth, but I failed. Maybe someone else can figure it out. Anyway, it's more than the $71.4B that Microsoft Copilot told me:
Accumulating bitcoin might be seen in same way as with the nuclear arms race and Einstein's theory. If we're not going to get to the speed of light, but we still want to go faster than anyone else, it may be best for a nation to buy bitcoin now.
For nations to avoid being left behind in this game of game theory, the best and smartest move may be to begin accumulating bitcoin now. The Prisoner's Dilemma tells us that the possible consequences of NOT doing so are simply not an option. The rational choice is to stack.
One reason why you might be struggling to fit Einstein's equation into your analogy is that you're using the rest state simplification.
only applies to stationary bodies.
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172 sats \ 12 replies \ @DarthCoin 8h
Guys please stop with these aberrations about "states that stack BTC". Do you really forget why we are here? Bitcoin is to dismantle the states. Bitcoin is for individuals not for the states.
Just a simple question: if all states stack BTC and not use it, what are you going to use? The tokens they will give you ? Are you out of your mind with this bullshit?
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260 sats \ 5 replies \ @alt 4h
Bitcoin is permissionless, so it doesn't matter who it's "for", anybody and everybody can use it, which necessarily includes state actors.
The thing is that even if nation states capture large Bitcoin reserves and hence capture large amounts of wealth, they still don't get to control Bitcoin. However, in gaining wealth through Bitcoin, they will lose their ability to extract wealth from their productive citizenry via inflation.
A nation state adopting Bitcoin will only have access to the finite amount of wealth that they themselves control, instead of the near infinite "wealth" that they can currently access by inflating their money. A bitcoin state must then either operate at profit or they will soon find that they have no Bitcoin left to spend. The conclusion is that Bitcoin will force states to operate efficiently, and I believe that the only way they can do that is to downsize massively.
A state adopting Bitcoin may be wealthy but it will necessarily be small.
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110 sats \ 0 replies \ @javier 4h
Let's make an analogy:
For thousands of years, states have used gold. For thousands of years, thieves and mafia have used gold. If we consider gold to be a good thing (at least before Bitcoin), does that mean that thieves, mafia and states are good?
Obviously they aren't. This is a fallacy.
It doesn't matter if states use Bitcoin. That doesn't make them good at all. They are just using a good thing for (very) bad purposes, as usual.
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120 sats \ 3 replies \ @DarthCoin 4h
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0 sats \ 2 replies \ @alt 4h
"Nation states will buy Bitcoin because it's permissionless, but this won't give them any more control over the network, and will in fact accelerate their downfall by removing their ability to extract wealth via inflation. A state that ends up operating on Bitcoin will necessarily be much smaller and constrained than it is today."
"STATIST"
I still can't work out if you're a troll or if you're just a bit dense, Darth.
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125 sats \ 1 reply \ @DarthCoin 4h
Please answer this simple question: If a state have the control of a BTC wallet keys, who really OWNS those BTC? How that state will help YOU just by keeping the keys of that BTC wallet? WHO is "the state" ?
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0 sats \ 0 replies \ @alt 3h
  1. Depends on the arrangement, multi-sig and so on could place ownership in the hands of a group or committee. I don't see how it's relevant.
  2. I never said the state would help me by virtue of holding Bitcoin. Rather, by the development of a Bitcoin standard the state will necessarily shrink. This does help me, it stops hindering me, because I don't believe the state is actively helpful.
  3. Again, not sure how this is relevant to the point.
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He is stating a likely reality, Bitcoin is for Everyone with a capital E... that means states as well.
Please share how you propose stopping states from stacking?
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1000 sats \ 1 reply \ @DarthCoin 4h
how you propose stopping states from stacking?
Individuals stacking more and stop using fiat. That's it.
Bitcoin is for Everyone
Nope...
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That's the beauty of states stacking, they will accelerate the devaluation of their own currencies.
States having sats does not equal states controlling Bitcoin, it does however shift incentives away from fighting Bitcoin, especially if they are competing with each other in order to have some.
We might need to speed up layer 2 improvements if we want to keep decentralization up though, if states do start stacking hard it's going to become very expensive to manage channels.
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I read this as a thought experiment. What if states start to stack and is it likely? Not necessarily supporting or liking the idea, just observing.
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0 sats \ 1 reply \ @crrdlx OP 4h
I don't think it's realistic to think that states will be dismantled. Maybe that's an aspiration for some, but then there's reality.
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130 sats \ 0 replies \ @DarthCoin 4h
What is a state? Let's go back to basics...
Saying that is not realistic it means you love slavery...
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Thanks for the great read! Exciting times we live in
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47 sats \ 1 reply \ @freetx 14h
However, it's not simply 800,000 times current market price..... Anyway, it's more than the $71.4B that Microsoft Copilot told me:
Correct. Another way to look at it is: Funds Flow vs Market Cap.
Lets take an simplistic example: We have auctioned 5 identical rare baseball cards on eBay. Here are the results of sales.
Card 1: Sold for $100 Card 2: Sold for $150 Card 3: Sold for $250 Card 4: Sold for $500 Card 5: Sold for $1000
The "market cap" of that particular card is $5000 (last sale X total cards). However only $2000 in "Funds Flow" produced that $5000 market cap. So in this case its a 2.5x ratio.
In essence, this means that, on average, every $1 put into purchasing raised the market cap by $2.50.
These are made-up numbers, but the point is each additional dollar put into purchases winds up have a multiplier effect on total market-cap.
From my cursory research, I think IBIT (Blackrock BTC ETF) has taken in 28.92B in fund inflows since launch. This is only Blackrock and not the others....so...
Lets round that up to $35B to roughly estimate all Bitcoin ETFs. In the same time, BTC price has moved from approx $45,000 to $88,000 over that time frame. This increase represents a market cap jump from $900B to 1.8T...so an increase of about $900B.
Thus $35B in inflows produced $900B in market cap gain (a 25x). Obviously this is a flawed analysis since its only capturing ETF inflows and not all the private/OTC purchases. However, I think its safe to assume that the ratio could be 10x.
Therefore $60B in purchasing inflows (ie. US buying 750,000 coins) could produce somewhere between $600B and $1.5T
....as you say though, such a move would likely ignite a game-theory inspired bidding war...so the US may need to spend significantly more than $60B to acquire those 1M coins...thus the total worldwide funds flow could be massive and result in $10+T in market cap.....
DISCLAIMER: This is all made-up and could be grossly off...but as back-of-envelope guesses its entertaining to think about.
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Appreciate your thoughts and math here, thanks.
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10 sats \ 0 replies \ @Thereal 13h
Now this is the real story of bitcoin fomo , 👍🏻 nice
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10 sats \ 0 replies \ @sagars209 6h
Bitcoin is truly successful only if nation states boundaries disappear, which eventually will. we have nation states only because of fiat currencies. once fiat money dies so does nation states
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