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Money Metals News Alert
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March 31, 2025
– Gold and silver prices are marching higher. Gold closed on Friday at
another all-time high, and silver closed at the highest level since 2012.
Precious metals investors are
encouraged to find gold and silver trading as a safe haven rather than as risk
assets, at least for now. Stock prices fell again last week and are swooning
further this morning. The S&P 500 is back at levels last seen in September.
The U.S. dollar finished largely flat
for the week as did yields on the 10-year Treasury.
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Gold : Silver Ratio (as of
Friday's closing prices) – 90.2 to
1
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Swap U.S. Gold Reserves for Bitcoin...
Seriously?
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Washington D.C. is still a prime
breeding ground for bad ideas. One of the dumbest, and more dangerous, is the idea
of swapping U.S. gold reserves for Bitcoin.
In fairness, we should first mention
we are encouraged by the growing acceptance by a handful of policymakers of
alternative, non-government forms of currency.
U.S. Senator Cynthia Lummis of Wyoming
began advocating
for swapping U.S. gold for Bitcoin shortly after Donald Trump won the election
last fall. It was music to the ears for a number of young crypto enthusiasts who,
in their overwhelming zeal, have attempted to position Bitcoin as a superior
alternative to gold.
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Bitcoin and gold may share
some of the honest money fanbase, but that is about as
far as any similarities go. One is tangible and time tested. The other is
entirely digital and relatively brand new. Both assets have their own strengths
and weaknesses.
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However, it???s a little bizarre to see
people pitching Bitcoin as a replacement for gold, and it???s a little suspicious.
Why so much effort to convince gold
investors that Bitcoin is better and divide the honest money crowd? Shouldn???t
there instead be a focus on bringing new people into the movement – the
overwhelming majority of people who hold neither gold nor Bitcoin?
Bitcoin was designed as an alternative
to fiat money, not gold. The creator of the project, known by the pseudonym
Satoshi Nakamoto, wanted a currency which is used by everyone and outside the
control of Wall Street banks, central banks, and governments.
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Instead of pressing for
Satoshi???s vision, people like Senator Lummis want to see the federal government
simply swap gold for Bitcoin. But she ought to consider whether making it a
???reserve??? asset is of any benefit whatsoever to the cryptocurrency or for her
constituents.
Start with a look at
history.
Gold is the original
reserve asset.
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The reason the U.S. government has
more than 8,000 tonnes is that the dollar was once redeemable in gold. The
Treasury therefore needed a stockpile, or reserve. But that redeemability was
defaulted upon.
There is little reason to believe any
reserve asset, including BTC, will be used for public benefit.
Pretty much nobody is advocating for
dollars to be redeemable in Bitcoin, which makes the argument for holding it as a
reserve somewhat disingenuous.
Proponents simply believe the token
will outperform gold as an investment. They want to see the Treasury dump
thousands of tones of gold and place a massive speculative bet in crypto markets.
Setting aside the dangers of such
speculation, we wonder exactly what the ???Bitcoin reserve??? crowd expects will
happen if Bitcoin turns out to be a home run investment for the Treasury.
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Will they simply feel
better when the federal government has trillions of dollars worth of Bitcoin on
the books – or are they expecting officials to do something with it?
Maybe they imagine
officials will do something positive, like use the massive trove of Bitcoin to pay
off federal debt. If so, they probably won't be pleased when the Treasury floods
the market with BTC in order to raise cash so they can do so.
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Senator Lummis suggests a Bitcoin
reserve might help ???financial innovation??? and promote ???economic security.??? She
doesn???t provide details, so we???re supposed to take that on faith.
Politicians prefer fiat money and
expanded government control. Theories which incorporate this history will be far
more plausible than whatever the Bitcoin reserve proponents are hoping for.
We???ll offer one such theory, by way of
example. Officials are already discussing the next evolution in fiat money -- a
Central Bank Digital Currency (CBDC). CBDC tokens can be created without limit,
like fiat money, but provide transaction tracking and control.
Perhaps Bitcoin (and maybe the gold
reserves too) will be used in a ???basket??? of assets to add legitimacy and appeal to
the CBDC officials are planning.
Suffice it to say that Bitcoiners
should take a lesson many goldbugs learned long ago. It???s probably not a good idea
for governments to get involved in any system of money.
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This week's Market Update was
authored by Money Metals Director Clint Siegner.
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