The Bitcoin National Strategic wha?

Katie Martin (0:00)

So, listeners, just so you know, we recorded this a couple of weeks ago because we were being organized for holiday season. So we're going to hope that nothing massive changes between now and the time you hear this.

Donald Trump has a very crypto-friendly set of people around him, and there's even apparently serious talk that the federal government should establish a National Strategic Reserve of Bitcoin. Now if you're listening carefully there, you might be able to hear me rolling my eyes, but you can also hear me standing back in admiration at the explosive jump in Bitcoin prices since Trump's re-election. The price has more than doubled this year to about $100,000. So today on the show we're asking, what is this all about? Why would Uncle Sam buy Bitcoin? And what would that all mean? This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I'm Katie Martin, a sad no-coiner and a markets columnist at the FT in London. And I'm joined by one of the brainiest people I know, former fund manager and now FT contributing editor Toby Nangle. If anyone can solve these mysteries, it's Toby. No pressure, Toby. But Toby, tell me, in the great pantheon of unconventional policy proposals, where would a strategic national Bitcoin reserve rank?

Toby Nangle (1:29)

Oh, it's going to be up there, isn't it? I mean, there was some chat with your former colleague, Philip Coggan, about the South Sea bubble back in the 18th century, which almost bankrupted the UK state because everyone piled into that as a way to make lots of money.

Katie Martin (1:45)

So we're in South Sea bubble territory here?

Toby Nangle (1:47)

Well, we could be. We'll have to see how we go.

Katie Martin (1:50)

So let's really, really quickly go back to the beginning and explain what Bitcoin is. Because listeners to the show, like my friend Layla, hi Layla, feel like they still just don't get it. And I would argue that there's not that much to get. But how does this stuff work? Like really, really top level?

Toby Nangle (2:08)

Okay, really top level. And there's going to be a lot of people who get cross with this being so top level.

Katie Martin (2:13)

Please send your emails to Robert.Armstrong at ft.com.

Toby Nangle (2:19)

So there's some really complex mathematical puzzles that need to be solved. And if you're solving those puzzles, computers win prizes. And those prizes are Bitcoin. And there can be a maximum of 21 million prizes ever won in the entirety of the universe. And so if you want to buy one of these bitcoins, that's someone else's mind by solving these puzzles, you can go and buy it on an exchange. That's what a Bitcoin is.

Katie Martin (2:45)

And this process of mining, right? So it's not people going down underground and finding a thing. It is this process of computers shouting at each other until they solve puzzles. And that process uses a lot of energy. It uses like as much electricity as Egypt. But the point is, if they win the prize, those prizes are worth $100,000 each. So this isn't like a physical coin or anything. And it's not a currency that you can like go to the shop and buy your groceries with. It's just, it's too volatile. And it's not like a bond or a stock that's linked to something underlying. It's not linked to a business or to a state as such. So you can argue about a lot of things to do with crypto, like what it's for, what it does. One thing you can't argue with is the price, right? Just $100,000 is $100,000.

It's up by, I think, about 130% so far this year. Does it deserve to be $100,000, do you think?

Toby Nangle (3:41)

Oh, I don't know. I mean, you can argue with the price, but you can go out and you can sell these things on the basis that they're going to be worth less now. Until recently, people have lost a lot of money doing that. So it hasn't paid to argue with the price recently.

Katie Martin (3:54)

People have had fun staying poor. But so you have these lines of code that have a certain value attached to them. They have no intrinsic value, really, but they have a price that's attached to them. Why would a national government, why would Donald Trump or anyone else want a national reserve of these things?

Toby Nangle (4:11)

Yeah, so people get really angry when you say there's no utility value to Bitcoin, because they say it's like digital gold. It's, you know, you can't destroy it. I mean, you can lose it in a landfill as a British guy famously has lost hundreds of millions of pounds of Bitcoin sitting in some landfill in Wales. But you can't destroy it. And so the folks on the crypto side will say, well, it's a bit like fiat currency, except it's limited in supply, that you can make as much fiat currency as you want. You can make as many dollars as you want, but you can't make as many Bitcoin as you want. And so it's got a little bit of value on that. But you're right. I mean, basically, value to get all high fluting is plutocratically defined. That is to say, you get...