Since the last time I wrote about a United States Bitcoin Strategic Reserve, there have been a few federal updates. Notably, Treasury Secretary Scott Bessent and Commerce Secretary nominee Howard Lutnick will be developing a plan to create the first United States sovereign wealth fund after President Donald Trump signed an executive order. The order also directs Bessent and Lutnick to develop a plan for creating the fund within 90 days. Lutnick holds hundreds of millions of dollars of Bitcoin and is bullish on the future of Bitcoin and I personally believe this is a huge indication that Bitcoin will be included in this fund.
Additionally, David Sacks, the Crypto Czar said that a top agenda item for his task force is evaluating “the feasibility of a Bitcoin reserve.”
Both of these developments in my opinion are very positive for the future of Bitcoin at a federal level but the reality is that Federal legislation takes time and can suffer from gridlock, party disagreements, and overall levels of bureaucracy that states oftentimes don’t have to deal with. For this reason, many states have already made progress in pushing strategic reserve legislation and other Bitcoin-related legislation forward. This is also a reason why I expect the states to once again “lead” ahead of the federal government as it relates to Bitcoin.
Bitcoin Laws (bitcoinlaws.io) is a resource that has emerged to specifically track Bitcoin and other digital asset legislation at the state level. The website highlights all of the outstanding legislation and provides the status and details on what is being proposed. I personally believe this resource will continue to be incredibly important for tracking what is actually happening at the state level as it relates to Bitcoin. It is rather difficult to stay up to date on all of the legislative occurrences as it relates to Bitcoin and Bitcoin Laws provides a one-stop-shop for all of the updates.
Most importantly, as of February 14th, 21 states have active ‘Bitcoin Reserve’ bills in the legislative process.
The idea that “the states will lead” reflects a theme of governance from the days of our Founding Fathers—that of Federalism. Federalism is a mode of political organization that allows separate states to unite under a national government while maintaining their own aspects of sovereignty. In layman's terms, Federalism allows for a Federal Government while also allowing State governments to have power within their individual borders. This system emphasizes a division of power with certain powers being granted to the federal government and others residing at the state level.
When the Founding Fathers created the Articles of Confederation they emphasized state power over a strong federal government. This system led to some problems such as economic instability amongst states and difficulties in coordinating a national defense eventually leading to the Constitution taking over and being the rule of the land for the centuries to follow. The Constitution created a stronger federal government while still protecting levels of state authority, autonomy, and sovereignty. The Tenth Amendment is a key aspect of this where it states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” The amendment means that any powers not explicitly given to the federal government by the Constitution fall to the states.
The states having and maintaining individual power was a focal point when the United States was created and remains true today. Justice Louis Brandeis gave one of the more famous statements related to the rights of the states when he referred to them as “laboratories of democracy” during the case New State Ice Co. v. Liebmann (1932). The full quote was, “It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” The meaning emphasized the idea that states were “laboratories” and should be encouraged to enact policy ahead of the federal government. The rationale for why states should be encouraged to do this is any policy they enact is specifically within their own borders while federal legislation typically applies to the whole country. As such, the “test area” for any new piece of legislation is much smaller and impacts far fewer people than any federally enacted policy of the same measure.
We have seen the “states lead” with numerous issues throughout the years including legislation on same-sex marriage, marijuana, healthcare experiments, climate change regulations, civil rights, and more. I believe the table is being set for the states to once again lead the federal government as it relates to policy regarding a Bitcoin Strategic Reserve.
It is also my personal belief the urgency at which legislation is confirmed for a Bitcoin Strategic Reserve is a matter of national security. Every day that a federal strategic reserve for Bitcoin is not enacted is another day that foreign adversaries and other nations can front-run our country.
The positive of this scenario is that the common man can also front-run the federal government.
The positive of this scenario is that states can also front-run the federal government.
The positive of this scenario is that states have the opportunity to once again lead and pave the way for what I believe the United States Federal government will also adopt.
Strategic Reserves within the United States both at the state and federal level will have their 0 to 1 moment and rapidly have their 1 to many rush to completion.
The States will Lead.
Michael Saylor previously laid out his 3 key catalysts for what would drive Bitcoin to a price of $5 million per coin. The 3 keys were:
The approvals of spot Bitcoin ETFs ✅
A change to the fair value accounting for Bitcoin balance sheet holdings ✅
The repeal of SAB 121 so that banks could custody Bitcoin ✅
As of January, the last of the 3, has officially occurred. President Donald Trump signed an executive order that repealed SAB 121.
SAB 121 (Staff Accounting Bulletin 121) was introduced during Gary Gensler’s tenure at the SEC and outlined significant restrictions on financial institutions that wanted to custody Bitcoin. Under SAB 121, banks had to classify Bitcoin, and other cryptocurrencies, as a liability on their balance sheets. This meant that for every dollar worth of Bitcoin they held, they were required to offset it with an equivalent amount of capital (treasuries or other assets were the typical way). What this requirement effectively did was make banks opt out of offering Bitcoin-related services entirely. SAB 121 was a nearly impossible mountain to climb for any banks that considered dipping their toes into the Bitcoin industry. SAB 121 was an attack on the Bitcoin and crypto industry aimed at preventing banks from getting involved.
Interestingly enough former President Biden vetoed a resolution passed by both houses of the US Congress that would have repealed SAB 121 in the early parts of 2024. Today is not the past and the current administration has given strong signals, both in their words and their action, that they aim to support crypto and AI, and not establish roadblocks that deter innovation or adoption.
With the rescinded SAB 121 comes the now-in-place SAB 122. SAB 122 removes the balance sheet recognition requirement that required banks to consider Bitcoin as a liability and pair every dollar of their “liability” with a dollar of an asset. Now, banks can choose to custody Bitcoin and can freely begin exploring products for their customers. The removal of SAB 121 is another glaringly obvious sign that institutional adoption of Bitcoin is only going to continue. JPMorgan and other, huge, institutions are already chopping at the bits to enter the Bitcoin industry.
With big banks entering the fold, financial instruments like loan products and derivatives become the logical next product offerings. Additionally, just like the Bitcoin spot ETFs, banks being allowed to custody Bitcoin is another signal to the world that Bitcoin is not only legitimate but here to stay. A more abstract idea is that the change from SAB 121 to SAB 122 is less of a political move and more of a market move. There is no denying how successful the Bitcoin spot ETFs were for Wall Street firms. Projecting out to the future, I believe the banks will see a similar level of success. With this potential success and the future growth of the entire industry, Bitcoin being opened up as a new source of income and customers for banks is something they will not want to turn their back on anytime soon. Jerome Powell seems to agree as he said, “Banks are perfectly able to serve crypto customers.”
It’s worth noting that banks holding Bitcoin require regulation and other preventative measures to ensure that customers’ funds are safe and not taken advantage of. The reason for this is that many banks engage in a practice of “rehypothecation” where the banks reuse their customers’ assets to finance their own trading and lending activities. In short, the crypto industry has already been impacted by this sort of fractionalized lending. FTX, one of the world’s biggest crypto exchanges blew up because they were lending and trading their customers’ assets and could not make due on withdrawal requests.
The reason that regulations, such as banning the rehypothecation of Bitcoin, should specifically be passed is that no government, entity, or individual can choose to print more Bitcoin. There is no “bailout” money with Bitcoin like there was in 2008 and 2009 during the financial crisis. There will be nothing the government can do (except print dollars), to help out a bank that lost their customers’ Bitcoin due to trades gone poorly. The fractionalized lending that banks currently operate on when using dollars is impossible with Bitcoin. Instead of waiting for the banks to understand this via a bankruptcy proceeding, regulations should be put in place to prevent the worst from happening.
The regulations I bring up are regulations that aim to protect the customers. These regulations are much different than what SAB 121 aimed to do, which was to completely deter banks and therefore their customers from entering an industry.
Regardless of my desire for clear regulations on how banks manage the Bitcoin they custody, there is an undeniable level of optimism that comes from seeing SAB 121 repealed. What aimed to choke corporations and key industry players out of Bitcoin, is now gone. This is yet another signal to the world that Bitcoin is here to stay.
Stack SATs.
It’s harder to not have faith than to have faith
Reading my old writing shows me how far I have come and how much differently I now write.
It begs the question of how much further there is to go.
January 21st, 2025 will be significant for Bitcoiners for years to come. After 12 years of imprisonment on a double life sentence, Ross Ulbricht was fully pardoned by President Donald Trump.
In his speech at the 2024 Bitcoin Conference, President Trump said he would pardon Ross on day one in office. However, day one was January 20th and the pardon did not come. Day two was when the pardon came. The 21st, a number synonymous with Bitcoin because of the 21 million fixed supply of Bitcoin, does seem to be the most obvious day for Ross’s pardon in hindsight. Regardless, Ross is now a free man again.
With Ross free, it would be a disservice to not explain his story and the importance of his actions.
In 2011 Ross created and operated the darknet website “Silk Road.” The Silk Road was operational until he was arrested in 2013. The Silk Road was an anonymous e-commerce marketplace, similar to Amazon and eBay, where users could sell goods and services in any capacity. Where the Silk Road was different was in its emphasis on user security and privacy. The Silk Road operated as a hidden service on the “Tor Network,” a network that enabled users to hide their IP addresses and location and operate on the internet with more privacy. Bitcoin was the other privacy tool that was used and was used as the payment method. At the time, Bitcoin was little known and allowed Silk Road users to pay for goods without having to go through a third-party intermediary like a bank. Additionally, the Bitcoin wallet addresses helped users maintain a level of anonymity.
The portion of the story I have outlined above has its roots in “freedom” and the free market. On this site, users could operate without being watched by “Big Brother” and could do as they please. Ross believed in the free market and viewed the Silk Road as a free-market economic experiment. Ross also believed that “people should have the right to buy and sell whatever they wanted, so long as they weren’t hurting anyone else.”
The Silk Road website perpetuated these beliefs. The Silk Road was an embodiment of not only these beliefs but also a near-total free market. However, if you have previously heard of the Silk Road, you have undoubtedly heard of it being used for illicit activities, mainly drug purchases. These would have been the news headlines—the immoral and socially deviant side of what occurs in a truly free market environment. It is worth noting there was a banned item list on the site such as stolen items, child pornography, counterfeits, and “generally anything used to “harm or defraud” others.”
This aspect of the Silk Road offering a channel for the free market to be the free market is what led to Ross’s arrest. It’s clear to me that Ross Ulbricht was the fall guy for the individuals who used the Silk Road to purchase illegal and illicit items. His sentence paints this picture further. Before January 21st, 2025, Ross had been in prison since 2013, as a first-time offender only convicted of non-violent crimes, and faced two life sentences + 40 years without parole. Before being pardoned Ross was “condemned to die in prison for creating an anonymous e-commerce website.” Ross was only 26 years old when he created the site and was passionate about free markets and privacy. The punishment did not fit the crime of believing in the free market.
The court system failed Ross and his pardon aims to rectify his situation. The sentence Ross received implied that no second chance was possible for as long as he lived. The sentence was also dramatically different from similar cases. The average prison sentence all of the other defendants related to the Silk Road case received was six years. This included actual drug dealers, people who helped run the Silk Road, and the men behind Silk Road 2.0. Before Ross was pardoned, all of the other people who were previously sentenced were already free today. It is worth noting that after the Silk Road was taken down, Silk Road 2.0 was created and launched within weeks and quickly grew larger than the original site with sales per month. However, unlike Ross, the founder of Silk Road 2.0 was given only 64 months in prison in the UK and the co-founder, an American arrested on the same charges as Ross was released after spending only 13 days in U.S custody.
I do not believe that Ross should have been held responsible for the actions of users who used his website. I believe him being held responsible for the actions of users of his website is an infringement on free speech as the code that Ross wrote to create the website was how he demonstrated his right to free speech. How others interpreted and used the code, was not up to Ross. There is currently an ongoing legal battle with the creators of Samurai Wallet for a similar issue. They were arrested because of how users used the application they created. I believe attacking the creators of privacy-facing websites is a poor precedent to set for the future of freedom. It is important to stand up for these attacks. Ross stood for freedom and the free market, based on his sentence and the last decade-plus spent in prison, one could argue he believed in freedom and the free market to a fault.
Ross Ulbricht is respected in the Bitcoin industry because of his original stances on freedom, anonymity, the free market, and libertarian values. Ross chose Bitcoin to be the currency on the Silk Road because it is freedom money that no third party can censor. Ross saw this reality at a time when Bitcoin was a niche idea in the corners of the internet. Using Bitcoin in the early days of 2011 on a global marketplace also opened countless eyes to the reality of what was possible with Bitcoin as freedom money. No bank could come in and freeze one’s account. The only action was sending payment and waiting for the Bitcoin network to process the transaction.
As I learned more about Ross, it became clear to me that the sentences against him aimed to make him an example. An example that implied, “If you go against the banks and the establishments who control money” you will lose. Over a decade since he was arrested, it’s clear to me the tables have turned. The people who have adopted Bitcoin and continue to use and hold it as “freedom money” are the people who are maintaining control of their future and their right to transact. Ross saw this reality in 2011, and I believe this reality is rapidly coming to light in today’s world.
Freedom wins again.
Ross is free at last.
Stack SATs.
Revolutions are invariably group activities
The concept of "Softwar" is increasingly of mind and increasingly a pending reality as #Bitcoin moves into the nation-state adoption phase.
Zac Townsend wrote a recent article (titled "Why A US Bitcoin Strategic Reserve Is Critical To Fending Off China") where he identified why a US Bitcoin Strategic Reserve was critical to fending off geopolitical allies. I agreed with his words.
My favorite quote is how the essay starts:
"Finance is increasingly a weapon of war"
The quote immediately makes you realize that warfare today isn't necessarily the war you see in movies or TV. There are agendas and avenues that are constantly targeted and infiltrated--many via a device as small as a smartphone.
In using finance as a weapon of war, the method that has the potential to do the most good is to win the war to stack more Bitcoin than any other adversary.
As game theory plays out, more focus and energy is spent competing in cyberspace than any physical battleground.
As game theory plays out and nation-state and world economy adoption continue to occur, projecting one's (or a country's) power to add more Bitcoin will be the only "war" or "fight" that is really worth fighting.
Gone are the days where sanctions and promoting the dollar are "good enough" activities. We must project our financial power in cyberspace. Embracing Bitcoin as a Reserve Asset is the first step in projecting this power.
Bitcoin is the New S&P 500:
The S&P 500 has been the standard for “the market” for decades. Where the S&P goes, the market as a whole largely follows. For this reason, the S&P 500 which indexes the 500 largest stocks in the country is seen as the benchmark for performance when looking at investments.
If you are an individual picking stocks, you aim to beat the market—the S&P 500. It is that simple.
If you are a hedge fund managing investor funds, your basis for performance is if you can beat the market—once again, the S&P 500. It is that simple.
With 2024 coming to a close, Bloomberg’s Nishant Kumar compiled a list of hedge funds and how they performed in the year.
While this list is not exhaustive, it paints a decent picture of the overall performance of the various hedge funds around the world. It also displays the true difficulty of beating the market. The S&P 500 returned 23.3% over the last year. By this metric, only 4 hedge funds in the above image beat “the market.” Warren Buffet, widely considered the greatest investor of all time, and Berkshire Hathaway outperformed the market by returning 25.5% or 2.2% better than the S&P 500. If hedge fund managers, seen as extreme professionals, struggle to beat the market, one can logically assume that the individual who has a career not based on stock trading will struggle to beat the market. By this logic, the safest thing for any individual to do would be to not worry about hedging their investments and instead, purchase shares in S&P 500 ETFs that track the performance of the market.
But the reality is that the returns of the market cannot be taken at face value. The alternative to investing (in anything) is holding cash that is being devalued at the hands of inflation. Holding $5 cash today would provide me with less purchasing power in a year. That is an undeniable fact because of the inflationary characteristics of fiat currencies. So people choose to invest in places with the hope of maintaining purchasing power for the future. The S&P 500, or the “market,” is one such place.
Interestingly, gold, a precious metal and not a company with any earnings, outperformed the S&P 500 over the last year. People have used gold as an inflation hedge, a savior from currency debasement, and as security during economic chaos for thousands of years. If gold, a hard asset for thousands of years, is outperforming the collection of the 500 largest companies in the United States it makes you wonder about the true validity of what a 23.3% return from the market really means. Can you take that percent at face value or is there a certain percentage of that return that is directly attributable to currency debasement?
While we will never get the exact answer, I believe more of the market’s return can be attributed to currency debasement than we would like to admit. I believe that people are flooding the equity markets with their capital in an effort to trade in their devaluing currency for something they believe will beat inflation. This conversation has not even dove into the fact that the Magnificent 7 companies contributed close to 14% of the total 23.3% for the S&P 500.
With this thinking, if the name of the game is to beat currency devaluation and maintain your purchasing power into the future, there is no better place to park your capital than Bitcoin. In an ever-increasingly digital world, Bitcoin takes the shortcomings of gold and capitalizes on all of them.
-Bitcoin has a strict, capped scarcity, gold does not.
-Bitcoin is easily transferable (cheaply and quickly) and extremely divisible. Gold is neither.
-Don’t believe me? Try transporting even one kilogram of gold across the Atlantic.
Better yet, Bitcoin produced about a 120% return in 2024. It absolutely blew the market out of the water. This isn’t an anomaly either, Bitcoin has routinely been one of if not the, best-performing asset of the year for many of the last 15 years. Over the last decade, Bitcoin has grown at an 80% compound annual growth rate. Over the last 5 years, it has returned a compounded rate of 67% annually. These are returns a hedge fund manager would kill to have.
I have previously discussed how Bitcoin is older than the stock market. I now believe it should be the basic metric for what “beating the market” is viewed as. For this reason, Bitcoin is the new S&P 500. You either beat Bitcoin, or you lose.
In the future, the best-performing portfolios won’t necessarily be run by stock traders, hedge fund managers, or traditional finance executives, rather they will be held by the normal person who buys and holds Bitcoin. An action so simple, anyone can do it. An action so simple, people will refuse to do it because of it being boring. An action so boring, people would rather chase the new flashy item and lose than be bored and win. Yet, if you accept the simplicity and boredom, you can have a portfolio that could outperform every hedge fund on Wall Street!
Beating the market is very difficult. Scroll up to the image above and see how many hedge funds in the chart beat the S&P 500. I will remind you again that Warren Buffet only beat the market by a little more than 2%. But after shifting the “market” to be Bitcoin, all of the hedge funds and Warren Buffet got crushed.
Stop overthinking it and realize that Bitcoin is the new “market” and that this market is much harder to beat than the S&P 500.
If you can’t beat Bitcoin (the market), then you should just buy Bitcoin.
Stack SATs.
The first book I have read in 2025 is “The Big Short”
I timed it up with the anniversary of The Genesis Block. With every page I realize more and more how manipulated the market was and how absolutely necessary a solution like Bitcoin became.
2008 is a reminder to never forget history
Stock market closed today.
#Bitcoin open today, tomorrow and every day. 24/7/365