Odaily Planet Daily News Pomona College economics professor Gary Smith and NTT DoCoMo Mobile Science Award winner Jeffrey Funk wrote that US President-elect Trump plans to establish a federal Bitcoin reserve to use it to repay the US Treasury debt. If the federal government spends trillions of dollars to buy Bitcoin, it will definitely push up the price of Bitcoin. In fact, the price of this cryptocurrency has already soared due to these expected purchases.
But how can the US government repay the national debt by buying Bitcoin at an overvalued price?
Real investments such as bonds and stocks can generate income that is beneficial to the owner even if their prices do not rise. Bitcoin is not a real investment, and buyers can only profit by selling it to another, even more stupid person at a higher price than they paid. The federal government may foolishly spend hundreds of billions of dollars to buy Bitcoin at higher and higher prices, but is there a bigger fool than the federal government? Who will the government sell hundreds of billions of dollars in Bitcoin to?
Maybe Trump envisions a "pump and dump". In a "pump and dump" scam, a group of scammers spread false rumors about investments while trading at higher and higher prices to attract credulous people to enter. When the price is bid up, the conspirators dump their holdings on those victims. The federal government should stop these shenanigans, not join the scammers in conducting their own pump and dump. (morningstar)