Cryptocurrencies , bitcoin

Disclaimer.. I'm a crypto sceptic and don't own any bitcoin. 

This is not to say that I won't buy any in the future, but at this moment I'll sit on the fence.

I'm writing this post to expand my understanding.

What is Crypto?

It is a digital currency.

Bitcoin is a value based token. It is the first but just one of many cryptocurrencies.

The promise is that bitcoin is the currency for the people. It is anti establishment.

It is seen as decentralized, free from government & a salvation from the "greedy banks".

It's been 16 years since bitcoin launched. But does it have any widespread utility?

What is the block chain?

It's a public digital ledger ... a way to record a transaction that is independent of a 3rd party.

It means that I can transfer value to you without needing permission from a intermediatory.

For example:

If you go back 5 thousand years, when we transact with each other we typically use a third party.

If I was to buy your house I'd instruct my bank to send funds to your bank. The bank/s would charge a commission.

Or if I was to buy food at a restaurant with my credit card or phone, Visa or MasterCard or Apple transfer the digital money on my phone from my bank to the bank of the restaurant.

Blockchain is a way I can avoid paying the 3% charge from Visa, Mastercard etc.

In the past, this technology has been stalled by the regulatory processes from Governments, banks, credit card companies , taxi companies etc, etc. 

(ie anyone afraid of the new, potentially disruptive, technology).

In the past various US and European Governments had stalled its acceptance.

But now the Trump administration has come to power and he is heavily influenced by the crypto lobby.

The real person behind this is Paul Atkins. He is the acting SEC (securities and exchange commission) chairman. He believes that the increased use of crypto will reduce the cost of transactions.

It will disrupt the role of banks and move beyond the types of governance we are used to.

This technology is quite volatile. Eg after Trump was elected the price of bitcoin rose 40% in a month.

It eventually rose to 126K but has since dropped to 80K.

Trump issued 2 meme coins on the eve of his election (for him and his wife).

These meme coins went up in value, he takes a few hundred million out for him self and these coins over the last 7-8 months have crashed in value. This is a problem when the President is issuing self interested meme coins. Is he is susceptible to grift? Will people who buy the token  try to influence him?  There are also trump connections to World liberty Financial .

The Trump family receives 75% of net proceeds when WLFI sells tokens, as well as getting cuts of stablecoin profits.

Now it seems that there are no restraints to Bitcoins adoption as far as the US govt is concerned. 2025 is the year crypto went mainstream. But has this also soured the industry? Has it had the opposite effect of what the crypto industry wanted.

Instead of promoting the future promise of  making transactions cheaper 

and easier for the consumer has it made crypto look like its full of scammers.

Today, I wonder if bitcoin will ever life up to its promise of being a digital currency we can trust.

It has high volatility, high transaction fees & high fraud.

There is so far no widespread adoption as a payment system.

You cant use it to buy groceries... and even if you could it would probably be converted to hard currency ASAP.

I suspect that the real use of bitcoin is as a speculative asset.... like gold.

It's 4x more volatile than stocks.

Stablecoins & US debt

 Most Stablecoins Already Depend on U.S. Debt

This part surprises people:

Many stablecoin issuers hold U.S. Treasury bills as reserves.

So instead of paying off debt, stablecoins often increase demand for Treasuries — they help finance the debt rather than erase it.

👉 Some economists think stablecoins could increase U.S. financial power globally and make it easier to sustain high debt —  though not eliminate it.

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Alright — this is where it gets interesting, 

The new Trump Govt is a fan of crypto.

I wonder if this is related to the US deficit ???

The real debate is whether crypto vs stable coins can be used to  pay off U.S. debt?

👉 maybe the better question is could stablecoins actually make it easier for the U.S. to carry large debt long-term?

Many analysts think the answer is possibly yes — for a few key reasons.

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🌎 1) Stablecoins Can Expand Global Demand for Dollars

Most major stablecoins are dollar-based. When people in other countries use them:

+They’re effectively using digital U.S. dollars

+Thus demand for dollar assets increases worldwide

Why that matters:

+When global demand for dollars rises, demand for U.S. Treasuries often rises too.

+More buyers of Treasuries = lower borrowing costs for the U.S.

Think of stablecoins as exporting the dollar into places traditional banking never reached.

🏦 2) Stablecoin Reserves Often Buy U.S. Debt

Large stablecoin issuers typically back their tokens with:

+Treasury bills

+Cash

+Short-term government securities

So when stablecoins grow:

+Issuers may buy more Treasuries to back them

+That indirectly helps finance U.S. deficits.

In simple terms:

👉 More stablecoin usage → more Treasury demand → potentially cheaper borrowing for the government.

U.S. dollar-based stablecoin issuers hold much of their reserves in short-term U.S. Treasuries. The two largest USD stablecoins by market capitalization, Tether's USDT and Circle's USDC, report holding 62% and 29% of their total reserves in T-bills, respectively.

⚡ 3) Faster Digital Dollar Networks Strengthen Dollar Dominance

One big threat to U.S. debt sustainability would be losing the dollar’s global reserve status.

Stablecoins might actually reinforce it by making dollars:

+Easier to move across borders

+Faster than traditional banking rails

+Accessible without U.S. bank accounts

If businesses worldwide settle in dollar-stablecoins instead of other currencies, the U.S. keeps a powerful advantage:

💡 It can borrow in its own currency at scale.

📉 4) Lower Interest Pressure (The Real Prize)

The biggest risk with $37T debt isn’t the total — it’s the interest payments.

If stablecoins increase demand for Treasuries:

+Interest rates on government debt could stay lower than they otherwise would.

+That makes the debt more manageable even if it keeps growing.

Economists sometimes call this maintaining “financial gravity” around the dollar.

Risks:

This isn’t automatically good for the U.S.

There is a Regulatory risk

If stablecoins grow too large without oversight:

+Bank deposits could shrink

+Financial stability issues could emerge

There is also the risk of Loss of control

Private companies issuing dollar-like money can complicate monetary policy.

And there is the risk of Competition

If non-USD stablecoins (e.g., yuan-based) gain traction, they could weaken dollar demand instead.

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GOLD

Tether (one of the worlds largest holders of US treasuries) has been aggressively purchasing physical gold to back its stablecoins and invest its profits. Company executives have explicitly denied rumors of a Bitcoin sell-off, reaffirming that they continue to hold and accumulate both assets.

The Rumor vs. Reality

The Claim: Online speculation suggested Tether was dumping Bitcoin holdings after data showed a dip in their reported wallet balances during mid-2025. [1, 2]
The Fact: Tether CEO Paolo Ardoino clarified that the company did not sell any Bitcoin. The movement of funds was later tied to corporate reallocations, such as transfers to external ecosystem initiatives rather than an outright market sell-off. [1, 2]

Tether's Strategy on Gold and Bitcoin

Active Gold Accumulation: Tether has amassed massive physical gold reserves (surpassing 140+ tons) using a portion of its operational profits, rivaling the gold acquisition pace of major global central banks. [1, 2, 3]
Dual Reserve Support: The company routinely reinvests its profits into a diversified portfolio strategy that includes U.S. Treasuries, Bitcoin, gold, and land, viewing both precious metals and crypto as long-term hard reserves.
Introduction of a gold stablecoin: This will have a market inside the US.

Gold’s bounceback (AUG 2026) is mostly because of five buyers scooping up tons and tons of the precious metal. Who are they? Four foreign central banks (Poland, China, Ubekistan, Kazahkstan)  and a company that deals in currency—cryptocurrency’s Tether. Tether has been buying more gold than any of these individual banks

Tether is making its massive buys for the very reasons that the central banks are—to diversify its holdings and to hedge against inflation and any significant weakness in the dollar, which Tether’s crypto stablecoin USDT 

USDTUSD

-0.01%

 is pegged to.

Tether’s gold buys escalated in the second quarter and might be one reason why the metal has jumped this summer, according to analysts at Jefferies.

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US govt debt - Ways to pay it off

The U.S. government doesn’t “pay off” debt the way a household pays off a credit card. 

Instead, it manages debt over time. A $37 trillion debt sounds like a bill due tomorrow — but in reality it’s a mix of bonds constantly being rolled over. 

Here are the realistic ways the U.S. could reduce or stabilize it:

🧾 1) Run Budget Surpluses (Spend Less Than It Earns)

How it works:

The government raises more revenue than it spends and uses the extra money to pay down existing debt.

What would be required?

+Higher taxes, lower spending, or both

+Big reforms to major programs like Social Security, Medicare, or defense

Reality check !!!

+The U.S. hasn’t had sustained surpluses since the late 1990s.

+Paying off the entire debt this way could take decades and would likely slow economic growth if done too aggressively.

👉 This is the most straightforward method — but politically very hard.

📈 2) Grow the Economy Faster Than the Debt

How it works:

If GDP grows quickly, debt becomes smaller relative to the economy even if the dollar amount rises.

Example:

+Debt = $37T

+Economy grows from $28T → $40T

+Debt burden feels lighter even without paying it down.

Ways to do this:

+Productivity growth (technology, AI, infrastructure)

+Immigration and workforce growth

+Innovation and investment

👉 Historically, this is how many countries reduce debt stress — not by paying it off, 

but by outgrowing it.

💸 3) Inflation (The “Quiet” Reduction)

How it works:

Moderate inflation reduces the real value of fixed debt over time.

If prices double over decades:

The government repays bonds with dollars that buy less.

Pros

+Doesn’t require explicit tax hikes

Cons

+Hurts savers and can destabilize the economy if too high.

👉 After WWII, inflation + growth helped shrink U.S. debt from about 120% of GDP to much lower levels.

🧮 4) Change Taxes or Spending

This isn’t a separate method — it’s the main lever inside budget surpluses.

Possible moves:

+Raise income or corporate taxes

+Introduce new taxes (wealth, carbon, VAT)

+Reduce entitlement growth

+Cut discretionary spending

Each option has trade-offs:

+Tax hikes can slow growth

+Spending cuts can be politically unpopular

🔁 5) Keep Rolling the Debt (What Happens Now)

Most U.S. debt isn’t “paid off.” When bonds mature:

+The Treasury issues new bonds

+Investors buy them

+Old debt gets replaced with new debt

As long as investors trust the U.S., this system can continue indefinitely.

👉 Many economists think the real goal isn’t zero debt — it’s keeping interest costs manageable.

🚫 6) Default or Print Money Aggressively (Very Unlikely)

These are extreme options:

Default: refuse to pay — would trigger a global financial crisis.

Money printing to erase debt: could cause runaway inflation.

Because the U.S. dollar underpins the global financial system, 

these are considered last-resort scenarios.

7) Q.E. by Steepening the Yield Curve

This is a sneeky version of option 5.... the treasury issues bonds , 

but banks, rather than investors, buy them.

How this happens:

The Fed lowers short term interest rates and at the same time starts shrinking its balance sheet 

(Fed does this by selling bonds).

When the Fed sells bonds, long term interest rates are pushed up.

 This increases the spread between short & long term bonds and steepens the yield curve.

    

   A steeper yield curve means that the difference between short-term and long-term interest rates is unusually wide, with long-term rates paying significantly higher yields than short-term ones. 

Thus banks can borrow money cheaply in the short term and can make more money in the long end.

To do this regulations preventing banks taking on excessive debt (such as the SLR - Supplementry leverage ratio) need to be relaxed.

Once these limits come off, banks can buy bonds (with leverage) , and absorb all the bonds the govt will sell. The Fed shrinks its balance sheet. The net effect is the same as if the Fed bought the bonds itself.

Thus the extra money printing is absorbed (and hidden) by the commercial banking system.

🧠 The Big Insight

The U.S. probably won’t ever fully “pay off” $37T .

What matters is:

+Debt relative to GDP

+Interest payments as a share of the budget

+Investor confidence

Think of it less like a mortgage that must be cleared and more like a permanent financial system the government manages.