Opinion: Crypto is still a Ponzi scheme, despite Trump’s reserve plan
Over the weekend, President Donald Trump said he wants to create a U.S. crypto reserve, and he specifically cited several cryptocurrencies he expects to be in the reserve including XRP, Solana, Cardano, Bitcoin and Ethereum.
This immediately set off a huge surge in their prices because the president was talking about having a stockpile of crypto. A lot of those gains have since been given back, but when Trump talks about a crypto reserve – it’s not quite clear what he’s talking about.
One idea is that the government can create a stockpile of any cryptocurrencies seized from drug traffickers, terrorists or other criminals who have crypto in their possession. Typically now, when the government seizes them, they sell them off.
Instead, the government could just keep it on hand as our reserve.
However, the more likely scenario is a reserve in which U.S. taxpayer funds are used to acquire cryptocurrencies for some purpose that I’m not very clear on. What is clear is that this would prop up the prices of these otherwise worthless digital currencies, which have no intrinsic value whatsoever except for whatever the last guy decided to pay for them.
Hence the words “Ponzi scheme.”
Trump’s plan is troublesome for several reasons.
First, some in the crypto world think that it’s a bad thing for the federal government to be involved because it allows Uncle Sam to pick winners and losers in the crypto space, and that doesn’t speak to the “free market” that exists now.
But the more glaring problem is that the president and his family are active players in the crypto industry. They have their own for-profit crypto companies. Therefore, any move to make the federal government not just a player in crypto but a key player that can prop up prices of specific cryptocurrencies, raises a lot of ethical questions.
The only certainty is that legal challenges will follow.
The cryptocurrency market is a bit like a casino. If everybody on the casino floor is starting to make a lot of money, you think to yourself, “Well, I better sit down at the craps table because everybody else is making money, and I want a piece of the action.”
In reality, the odds are stacked against you, and you don’t know how things are going to break.
David Lazarus covers business and consumer news for KTLA. Prior to joining the station full-time, he was an award-winning business columnist for the Los Angeles Times.