Author: business

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

When all the stocks are down, it’s sometimes worth pausing to appreciate how much specific stocks are really really down. For example: Tesla.

Since Tesla hit an all-time high on December 17, the shares have dropped 53.7 per cent:

For the period, Tesla is the world’s second-biggest faller in percentage terms outside of the small-caps:

By market capitalisation, Tesla has lost $795bn since December 17.

The company is now smaller by market cap than Berkshire Hathaway, Broadcom, Eli Lilly, Saudi Aramco and Taiwan Semiconductor. It’s still a few million ahead of Walmart. though the trading day’s not yet finished:

The drop owes everything to multiple compression, having been accompanied by a continued drift lower in consensus forecasts:

Elon Musk, a celebrity, owns 411mn Tesla shares and, having pledged more than half his stake to fund other ventures, 50.7mn options on shares. Based on Bloomberg data, his net worth has fallen by around $150bn over the past three months.

Maybe there is such a thing as bad publicity.

Further reading:
— Tesla’s departure from reality, in one chart (FTAV)

Few tales in corporate finance are as audacious, bewildering, or downright entertaining as that of the company formerly known as MicroStrategy. This once-humdrum business-software vendor has transformed into a high-octane bitcoin investment vehicle under the flamboyant leadership of Michael Saylor, its co-founder and executive chair. The company, now called Strategy, holds nearly 500,000 bitcoins, equivalent to 2.38 per cent of the total supply, acquired at an average price of around $66,000.

What captivates markets isn’t just the scale of Strategy’s bitcoin accumulation but the relentless financial engineering underpinning it. The latest manoeuvre is the announcement last week of a $21bn “at-the-market” (ATM) offering of STRK, a convertible perpetual preferred stock currently yielding more than 9 per cent (payable at the company’s discretion in cash or common stock). The proceeds will be used, predictably, to buy more bitcoin.

At today’s bitcoin price of around $80,000, Strategy could amass another 262,500 bitcoins, bringing its total holdings to 3.6 per cent of all bitcoin in existence. According to JPMorgan research, “MicroStrategy’s bitcoin purchases alone accounted for 28 per cent of last year’s record capital inflow into crypto markets.” It’s no exaggeration to say that Strategy is not merely a major player but the market itself — a blue whale consuming all the available krill in the bitcoin ocean.

This latest financial feat follows hot on the heels of a $42bn ATM issuance of common stock and debt announced on Halloween 2024 — a fitting date for a company that thrives on financial trick-or-treating. At the time, Strategy’s shares closed at $244.50. The election of Donald Trump sent the stock soaring, reaching an intraday peak of $543 on 20th November, but it has since fallen to half that level. The rollercoaster ride has been white-knuckle stuff.

At the heart of this bitcoin bonanza is an anomaly few investment firms can replicate: Strategy’s stock trades at a persistent premium to its net asset value. Most investment trusts struggle to avoid trading at a discount, often inviting shareholder activism and pressure to buy back shares. Not so for Strategy, whose stock has commanded a premium as high as 3.8 times NAV, currently standing at around 1.7 times. This valuation anomaly has enabled the company to issue equity and equity-linked instruments aggressively, using the proceeds to acquire yet more bitcoin. It is a self-reinforcing cycle that has cemented Strategy’s status as a Wall Street obsession (and massive investment banking fee-payer) and a bitcoin juggernaut.

Yet, therein lies the rub. Strategy’s legacy software business does not generate cash. Servicing the high dividend on STRK will require further financial engineering, most likely through additional equity issuance. This will inevitably lead to dilution for existing common stockholders. STRK, in effect, functions as a perpetual payment-in-kind instrument, combined with an out-of-the-money call option — an elegantly convoluted mechanism primed for significant dilution.

Then there’s Saylor’s recent post on X (formerly Twitter):

Saylor has a penchant for making grandiose public statements. This latest cheeky piece of (self-)promotion is eye-catching not just for its bravado but for its potential regulatory implications. Legally, a company’s prospectus — replete with carefully lawyered risk factors — is meant to do all the talking. Public companies are not supposed to hype their stock offerings, and Saylor has previously tread a very fine line by championing bitcoin rather than Strategy stock itself. This latest post, however, is harder to explain away. 

The public plea is all the more striking given that back in 2001, Saylor had consented to a permanent injunction against violating antifraud provisions of US securities law to settle Securities and Exchange Commission charges of accounting fraud. (Without admitting wrongdoing, Saylor also paid $8.6mn in disgorgements and penalties.) This latest post appears to count on a more relaxed approach to regulatory enforcement under the new Trump administration.

Of course, if the price of STRK declines, the plaintiffs’ bar will be eager to pounce. But for now, Saylor seems content to test boundaries.

Saylor’s brilliance does not necessarily lie in investment acumen but in his ability to elevate Strategy’s share price — up over twentyfold since its pivot to bitcoin in August 2020. This has enabled insiders to cash in massively, with senior executives unloading $568mn of stock in 2024, including a flurry of sales by Saylor’s lieutenants near the peak in November. 

Yet it would be a mistake to conflate share price performance (and C-suite enrichment) with investment performance. Since its shift to bitcoin four-and-a-half years ago, Strategy’s cumulative return on its bitcoin holdings is a modest 20 per cent, while bitcoin has soared by around eight times.

Saylor’s timing has been far from impeccable. Between November 10 2024 and February 23 2025, according to Investor’s Business Daily, “Strategy spent $21.2bn buying bitcoin at an average price of $96,458.” The company buys high, not low, because it issues more shares and convertibles when bitcoin is soaring. This, in turn, fuels excitement around Strategy’s stock and drives up its premium to NAV. This habit of buying high is a feature, not a bug, of Strategy’s approach.

As for Saylor’s investment advice, on January 20 2025, he tweeted, “Sell your kidney if you must, but keep the bitcoin.” Had one followed that guidance, the result would be a market-to-market drop of 20 per cent in investment value and a realised loss of a critical organ.

Bitcoin may come back; an excised kidney will not. The broader question remains whether Strategy’s relentless fundraising to buy bitcoin is a masterstroke or a reckless gamble. The $1,000 per share conversion price for STRK represents a wager on bitcoin’s continued ascent. If bitcoin soars, all stakeholders benefit. If it stagnates or declines, the dilution from STRK and other equity issuances will weigh heavily on common shareholders, who are already being pushed further down the capital structure.

For now, Strategy’s financial wizardry is working. Notwithstanding the recent correction in its share price, the company’s ability to craft novel securities and attract new buyers has helped sustain bitcoin’s rise — or, more recently, temper its fall — reinforcing a feedback loop that keeps the game going.

But how long can it last? Strategy’s success depends on two critical factors: the continued premium of its stock to NAV and the ongoing appreciation of bitcoin. If either falters, the entire edifice risks collapse. In the meantime, Saylor and his team will presumably continue issuing equity and equity-linked securities, accumulating bitcoin, exhorting the US government to buy 20 per cent of total bitcoin supply, and selling their own Strategy shares at periodic intervals.

Saylor’s X post sums up Strategy’s strategy: strike the iron while it’s hot. The question is whether management’s hyper-opportunism belies the confidence they so often profess.

Further reading:
— If bitcoin is the future, what explains MicroStrategy’s need for speed? (FTAV)
— MicroStrategy’s secret sauce is volatility, not bitcoin (FTAV)
— Examining MicroStrategy’s record-shattering $21bn ATM (FTAV)

Last week, data indicated that the US trade deficit surged to a record $131.4bn in January, as businesses scrambled to stockpile goods ahead of President Donald Trump’s Schrodinger’s tariffs.

American economic data has generally been disappointing, but the worsening news on imports has in particular stirred up some angst. Because of the mechanics of how gross domestic product is measured and calculated (imports are subtracted as the point is to avoid double-counting and to measure domestic output) the widening trade deficit has helped send the Atlanta Fed’s widely-followed “GDPNOw” real-time economic forecasting model into a tailspin.

The 2.8 per cent contraction the model spat out was subsequently revised down to -2.4 per cent, and then to -1.6 per cent on Friday, after the latest US jobs numbers. But the nasty GDPNow reading naturally triggered a lot of alarming headlines about how the US seemed to be careening towards a brief recession.

Here’s Thomas Ryan, economist at the consultancy Capital Economics:

The ballooning of the trade deficit to a record high of $131.4bn in January once again stemmed from a huge surge in imports as businesses rushed to fast-track orders before new country- and product-specific tariffs took effect.

. . . This huge drag from net trade is what has done most of the damage to our first-quarter GDP estimate, which now stands at -2.5% annualised, as there has not been an offsetting rise in inventory buildup in the data. The good news is that this should reverse in the second-quarter as imports normalise without a corresponding inventory decline, which is why we are forecasting a strong rebound in GDP growth.

The main culprit, however, was a truly massive surge in US gold imports, as traders have also sought to get ahead of potential tariffs. And this matters a lot when we think about the economic implications.

While the motivation is the same (avoiding tariffs), the economic impact of movements in gold and other goods is markedly different. The vast majority of imports are either consumed or used in the production of other stuff, while gold mostly tends to sit inert and useless in a vault.

The tl;dr is that while all the uncertainty will unquestionably exact an economic toll, the Atlanta Fed’s GDPNow model’s horror reading can probably be relatively safely ignored.

The impact of gold in the US trade balance isn’t easy to spot, as movements in gold bars are well hidden in US statistics. They are strangely incorporated in the category “Finished metal shapes”, which accounted for $20.5bn out of the $36.2bn increase in goods imports in January.

“Unprecedented” is an overused word, but you can see just how extreme the January data is here.

Imports of other goods increased too, but to a far smaller degree. Pharmaceutical imports jumped $5.2bn month-on-month, for example, but this was only a 1.5x increase from January last year. Imports of passenger cars climbed by $1bn, but remained lower than in January last year.

In other words, bullion was boss in the January trade numbers. As David Mericle, economist at Goldman Sachs said:

We noted that most of the widening in the trade deficit since November reflects higher gold imports, which are excluded from GDP because they are not consumed or used in production. The details of the trade balance report indeed indicated that elevated gold imports contributed to the bulk of the increase in imports in January.

If you’re still not convinced of the importance of gold, let’s look at US trade with Switzerland.

Switzerland is the world’s biggest bullion refining and transit hub, and home to the world’s largest over-the-counter gold trading hub (alongside the UK). And the US trade deficit with Switzerland exploded to $22bn in January — nearly the size of the US goods trade deficit with China.

US goods import data matches Swiss customs data, which showed gold exports from the country to the US rose to 192.9 tons in January, from 64.2 tons in December.

You can enter different countries in the field above to see similar trends elsewhere. For example, the US has mostly enjoyed a trade surplus with Australia over the past decade, but a surge in Australia’s gold exports helped push the trade balance into negative territory in January.

But Switzerland seems to have been the big one, further evidence of how gold skewed things in January.

Perhaps fearful of being seen to be wrongly predicting a “Trumpcession”, the Atlanta Fed on Friday published an explainer of its GDPNow model and the gold glitch:

Although GDPNow does distinguish gold from other imports, the Bureau of Economic Analysis does, in tallying up the total of the net exports, subaggregate within GDP. Removing gold from imports and exports leads to an increase in both GDPNow’s topline growth forecast and the contribution of net exports to that forecast, of about 2 percentage points.

The topline growth forecasts also increased today — standard model -2.4 percent to -1.6 percent, “gold adjusted” model -0.4 percent to 0.4 percent — as data from today’s labor market report came in stronger than the model was expecting based on the limited February data the model received prior to that release.

So, a “gold-adjusted” GDP forecast of 0.4 per cent growth. Which isn’t great, but is very different from the scary headline number the Atlanta Fed model is still showing.

Goldman Sachs’ own gold-adjusted GDP forecast for the first quarter has been a more optimistic 1.3 per cent, but on Friday it cut its 2025 growth forecast and upped its “recession probability” to 20 per cent.

Here are the main points from the investment bank’s latest economic update, in case you’re curious, with Alphaville’s emphasis below:

— Larger tariffs will give a larger boost to consumer prices. In the absence of tariffs, we would have expected year-on-year core PCE inflation to fall from 2.65% in January to 2.1% by December 2025. Under our previous tariff assumptions, we expected core PCE inflation to remain in the mid-2s for the rest of the year. Our new tariff assumptions imply that it will instead rise a bit and peak at about 3% year-on-year, and in the risk scenario it would peak at around 3.3%.

— Larger tariffs are also likely to hit GDP harder through their tax-like effect on disposable income and consumer spending and their effect on financial conditions and uncertainty for businesses. While our previous tariff assumptions implied a peak hit to year-on-year GDP growth of -0.3pp, our new assumptions imply a peak hit of -0.8pp. In the risk scenario, this would grow to -1.3pp.

— Taking on board this additional 0.5pp drag on growth from our new larger tariff assumptions, we have reduced our 2025 Q4/Q4 GDP growth forecast to 1.7%, from 2.2% previously. This implies that GDP growth will be slightly below potential rather than slightly above. We have bumped up our unemployment rate forecast by 0.1pp to 4.2% in response.

— We have also raised our 12-month recession probability slightly from 15% to 20%. We have raised it by only a limited amount at this point because we see policy changes as the key risk, and the White House has the option to pull back if the downside risks begin to look more serious. If policy headed in the direction of our risk scenario or if the White House remained committed to its policies even in the face of much worse data, recession risk would rise further.

We’ll find out more when the first proper official US GDP estimate for the first three months of the year is published on April 30.

Crime is not the only use case for crypto. But reading the 2025 Chainalysis Crypto Crime Report, it appears to be one that is booming.

As its authors note, crime existed before the advent of cryptocurrencies. However:

Historically, tracing these financial relationships required infiltrating closed networks, navigating opaque banking systems, or relying on siloed intelligence. Now, blockchain transactions provide a clear record of payments between cartel-linked wallets and international suppliers, revealing not just individual transactions, but the broader financial infrastructure that sustains this fatal trade.

Yay the blockchain!

The authors have so far tracked over $40bn of crypto transfers to illicit addresses made in 2024, though they reckon the final total will be north of $51bn. Their data is fascinating, surprising, and more than a bit disturbing. What’s more, they’ve made charts that are too good not to share.

How does this crime break down?

Let’s explore some of the categories.

We are constantly hearing about crypto funds being stolen from exchanges, so we’ll start with stolen funds. Last year saw $2.2bn of crypto pilfered, with state-sponsored North Korean hackers taking over 60 per cent of the total.

Around half of North Korea’s hacks typically involve worker-related theft by North Korean IT workers who’ve infiltrated crypto and web3 companies. Frankly, we had no idea this was such a big deal, though we obviously have not been paying attention. A massive UN report published last year on sanctions violations reckoned that their surreptitious WFH tech army generates up to $600mn each year in salaries from western firms to finance the development of WMDs. And an investigation by Coindesk last year reported on an epidemic of (unwitting) sanctions-violations by crypto firms, with one prominent blockchain developer estimating that:

The percentage of your incoming resumes, or people asking for jobs, or wanting to contribute – any of that stuff – that are probably from North Korea is greater than 50% across the entire crypto industry.

So here’s Chainalysis’s first cool crypto crime chart, showing the distribution of stolen funds by event, split between North Korean and other addresses.

Basically, if your exchange or DeFi project has lost $100mn of crypto, it’s almost certainly sitting on a computer in Pyongyang.

Crypto scams have also been booming. Around $5bn of the $9.9bn of scams traced are associated with firms promising high-yield investments, aka crypto ponzis [ed: tautology?], some of which have been dodging the authorities for over a decade. This number excludes pump-n-dump’ing, wash-trading, general memecoin shilling, and all the sort of practices more traditionally associated by FUD-peddling no-coiners [ed: ah] with pretty much the entire crypto ecosystem. As far as we can tell, it’s counting only the investment scams promising some specific return.

But pig butchering (aka extortive romance scamming) as a category looks set to overtake investment scams, growing at a 40 per cent pace year-on-year. The details are horrific not only for the victims, but also for those forced into being perpetrators. Reports on how thousands have been trafficked into vast compounds, held by force, and then tortured if they fail to meet revenue targets set by their captors, are harrowing. And according to a report by the United States Institute of Peace last year, this is how a fair portion of the estimated 300,000 cyber scammers in the Mekong region are controlled.

But crypto crime is not booming everywhere. Despite a record $75mn ransom being paid to the Dark Angels gang in the first half of the year, ransomware has had a rubbish year — bringing in only around $800mn, a 35 per cent decline. At least some of this looks to have been due to good work by UK and US police. But it’s also fascinating to see the changing nature of ransomware payments, with a plethora of micro-ransoms being replaced by a rise in big-ticket ransoms. Either that, or inflation’s even worse than we thought.

Just as a Morningstar style box helps you tell your Baillie Gifford Global Alpha from your BlackRock US Mid-Cap Value, this chart helps you tell your Blackbyte from your Blacksuit:

Darknet markets (primarily online drug sellers) and fraud shops (typically selling compromised credit card information and personally identifying information) also had a poor year, recording $2bn and $250mn respectively, the latter down 50 per cent. These are the successors to Silk Road, run by Ross Ulbricht (aka Dread Pirate Roberts) before his arrest, imprisonment and recent Presidential pardon. The landscape is still finding its feet after Hydra, the more recently dominant darknet market, was taken down in 2022.

But there is now a competitive landscape of darknet markets offering to supply narcotics to anyone, wherever they are in the world. Here’s a typical listing for a synthetic opioid 20 times stronger than fentanyl on special offer, which includes free shipping to the US:

An administration so focused on tackling the ongoing opioid crisis that it is willing to burn its diplomatic relations as well as its own economy in an attempt to stop the flow of fentanyl over land borders might want to redouble efforts to combat this strain of crypto crime instead. Especially as the report’s authors, in examining transaction sizes, estimate that wholesale purchases by drug dealers account for around three-quarters of the traffic.

We’ve so far left out the two biggest categories for illicit crypto in the report — sanctions and ‘illicit actor’.

Chainalysis describes the $10.8bn ‘illicit actor’ category as:

[O]ur catch-all term for wallets of services and individuals both directly committing cybercrime like hacking, extortion, trafficking, or scams, as well as those facilitating this activity by selling the underlying infrastructure, tools, and services needed to commit crime and profit, including laundering-as-a-service.

Of course, just because you happen to make a BTC or two out of the odd ransomware attack or pig-butchering racket, that might not mean that all the rest of your crypto income wasn’t 100 per cent legit. So maybe assuming these flows are proceeds from crypto crime is a bit of a push. But we can see the logic for doing so.

Sanctioned entities and jurisdictions are the other big category, accounting for a further $15.8bn of crypto transactions. It may seem a bit unfair to conflate entities and jurisdictions. Doing so means including individuals and firms unlucky enough to find themselves in authoritarian sanctioned regimes that are just trying to build and preserve wealth. But, as the authors note: 

From a regulatory standpoint, the distinction between state-directed sanctions evasion and individual use has little impact, as broad sanctions prohibit nearly all financial interactions between U.S. persons and entities in sanctioned jurisdictions, regardless of intent.

Businesses and individuals in countries like Iran that are cut off from the international banking system have increasingly used crypto to evade sanctions. Indeed, Iranian crypto outflows surged 70 per cent to $4.2bn in 2024. It appears that the government in Tehran has retained some control of this portal to sanctions-evasion, as evidenced by their shutdown of Iranian exchanges in December in an effort to support the rial.

What’s the bottom line? Is this yet another article bemoaning bitcoin as a tool for criminality? Actually, when it comes to crime crypto increasingly does not mean bitcoin. Stablecoins are taking over the crypto crime scene — accounting for 63 per cent of illicit transactions in 2024, up from less than 20 per cent in 2020. Much of this appears to be associated with widespread use in sanction evasion, but not all.

Sure, bitcoin retains a dominant market share in ransomware and darknet market sales. But it’s expensive and slow to transact, as well as stupidly volatile. This makes it a terrible medium of exchange. Criminals, just like other humans, would much prefer something nice and stable. And according to the data, they are voting with their wallets.

Further reading:
— Crypto Strategic Reserves may look larger in the rear-view mirror than they are

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At least one group of crypto enthusiasts have done rather well out of Donald Trump’s presidency: the Trumps themselves. On Friday, we reported that the entities behind the official $TRUMP memecoin had made a tidy sum in the first three weeks:

Donald Trump’s crypto project made at least $350mn from the launch of his memecoin, a windfall that is likely to fuel concerns over conflicts of interest arising from the token.

The whole thing is a bit mind-boggling.

Most of the money involved is still parked in a liquidity pool: it is still supporting the price of the coin, which is currently trading at $11, but it is theirs. It makes sense for the Trumps to support the price: the stock of 831mn $TRUMP coins still held by Trump-linked accounts currently has a notional value of $9.3bn.

All of that for tokens that do . . . nothing? According to the official website, they exist as “an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol ‘$TRUMP’ and the associated artwork”. But, the terms and conditions tell us, they are “not political and has nothing to do with any political campaign or any political office”.

But let’s go back to that top quote and note those journalese weasel words: we said the sales were worth “at least” $350mn.

In truth, they could be a lot more.

Our bit of maths about how much they made was related to 158mn tokens distributed through liquidity pools, a feature on the Solana blockchain, which made up more than 90 per cent of the tokens sold so far. What of that little group of missing tokens?

As we wrote:

They sent about 14.7mn Trump coins to 10 different cryptocurrency exchanges including Binance, Bybit and Coinbase.

We don’t know the terms on which these little wedges were sent out and — despite their small number — they could really matter.

The reason why is that the initial distribution of $TRUMP coins saw them sell off extremely rapidly. The memecoiners had to make four big top ups in the first two hours to meet demand for the coins in the main liquidity pool.

Prices were not just buoyant through this process — they surged. But this meant that the overwhelming majority of the coins were sold by the scheme organisers when the prices were, compared with what came next, pretty low.

The first 100mn tokens of the 158mn were sold for $0.47 per token. A second Trump account, which joined the fray later, earned $5.10 per token. And a third, which followed on later still, earned $24.20 apiece.

The additional 14.7mn tokens were sent to exchanges from 9:41am on 18 January, a point after which the lowest price was $11.23. We do not know about the terms on which they were transferred — nor when, or how, prices were fixed. These transfers might have been deliveries of tokens agreed much earlier at lower prices.

But 14.7mn tokens at that price would be another $165.1mn. The amount could plausibly be even more: 4.5mn of the tokens were transferred to a Binance account when the price was above $60 per token.

When he was asked about $TRUMP by reporters, Trump said “I don’t know much about it other than I launched it, other than it was very successful.”

It’s hard to disagree.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The preamble on last week’s chart quiz was about William Playfair, inventor of time-series graphs and irrepressible blaggard.

It’s a pity that both modern biographies of Playfair are priced for the academic market, because there’s enough in them for a Netflix series. It was Playfair who wrote the pioneering works of dataviz from his cell in Fleet Prison after he flooded France with counterfeit notes to crash a revolution he probably helped organise, then who tried to profit from the resulting hyperinflation by printing more notes he falsely claimed had Bank of England backing. The rise of Napoleon and the line chart have the same genesis. Which was worse, who can say?

Anyway. Here are the answers to last week’s quiz:

That’s the share price of Brookfield, the asset manager recently dissected by Dan McCrum and Antoine Gara.

That’s the cumulative amount raised by Anthropic, a gen-AI company that promises artificial general intelligence as soon as next year, and whose chatbot currently underperforms Clever Hans the arithmetic horse.

That’s US foreign assistance as a percent of GDP, as nicked from this story.

Anthropic was the one that threw most contestants, but not Henri Besse de Laromiguière of AB Commodities in Monaco. To him, a T-shirt. To you, better luck this week.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

A week can feel like an eternity when the zone’s being flooded with FOMO. Last Sunday, Donald Trump tweeted:

A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA. I will make sure the U.S. is the Crypto Capital of the World. We are MAKING AMERICA GREAT AGAIN!

It was a big signal to crypto-world, not for what it said but because of what it implied. The Treasury’s holdings of the XRP, SOL and ADA tokens are literally zero. The Crypto Strategic Reserve therefore had to be a congressionally approved, cashed-up baghodler of last resort. It would be buying tokens on the open market.

Not one word of the tweet was true, however.

According to the factsheet accompanying an executive order signed yesterday by the POTUS, there’s going to be a Strategic Bitcoin Reserve and a Digital Asset Stockpile for other tokens. To build the funds the Treasury will take tokens “forfeited as part of criminal or civil asset forfeiture proceedings”.

Bitcoins “will be maintained as a store of reserve assets”, so held forever. Altcoins (meaning Ethereum, plus any XRP, SOL and ADA it chances upon in future) can be sold but not bought.

Ethereum, having gained then lost reserve-asset status within a week, is down by a bit this morning:

. . . while XRP, SOL and ADA trade had already resembled a pump-and-dump, Sunday’s tweet-spike having disappeared by halfway through Monday:

The US government holds seized bitcoin with a value at spot price of more than $18bn, according to Arkham Intelligence data. The state altcoin, memecoin and shitcoin stockpile appears to be a lot smaller: there’s a few million dollars of ether and not much else.

And because people think it’s funny to send shitcoins to government wallets, America holds more POOP, BabyTrump and Colon than three of the tokens Trump had previously identified as national strategic assets:

(Phil Stafford on MainFT has an excellent summary of what these tickers mean.)

In truth, there was very little chance of a Treasury reserve ever including new purchases of private pseudo-equity. Bitcoin might be trading like a 3x leveraged Nasdaq ETF but in the minds of the faithful, “digital gold” is sacrosanct. Altcoins like XRP, SOL and ADA more closely resemble community currencies. They’re fledgling unregulated white-label fundraising mechanisms for start-ups that don’t yet exist. Resisting centralisation and governmental control is their founders’ whole shtick. Pump-and-dump suspicions aside, traders probably sussed all this pretty quickly.

So, after a brief distraction, we’re back to bitcoin maximalism.

The main point of a US strategic fund, as MainFT’s Brendan Greely said in November, is to stick the Treasury with so much crypto that any restrictive measures become an act of self-sabotage. A side benefit is to remove an overhang that has existed since 2013, when the US confiscated bitcoins from Ross “Dread Pirate Roberts” Ulbricht, founder of the Silk Road dark-web marketplace. (Trump pardoned Ulbricht in January.)

Nevertheless, yesterday’s order indicates in hazy terms that the Treasury might be able to make new purchases for the Strategic Reserve, as long as they’re “budget neutral”:

The Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional bitcoin, provided that those strategies impose no incremental costs on American taxpayers.

It’s a distant echo of the bill proposed last July by US senator Cynthia Lummis, which recommended the Treasury buy a million bitcoins using mark-to-market accounting gains on banks’ gold certificates and Fed refunds that don’t exist.

Toby Nangle did a detailed teardown for FTAV of Lummis in November, concluding that while the bill is nonsense, there might still be enough flex in the law to allow bitcoin purchases using the Exchange Stabilization Fund. And OK, maybe. The ESF could be drawn down for bitcoin plunge protection in response to a crash, but routine purchases would be practically impossible to execute with any efficiency.

Bitcoin liquidity has been deteriorating. The launch last year of bitcoin ETFs has moved approximately $40bn into cold-storage custody accounts, while Micheal Saylor’s MicroStrategy is holding another $45bn that he says isn’t being lent out. Wash trading probably inflates daily bitcoin trading volumes but velocity — a per-token measure of market activity — is as low as it was in 2012 when a token cost about $10.

With market liquidity so poor, the $40mn or thereabouts of daily new supply takes on an outsized importance. The combined power of the publicly listed mining companies mints maybe 100 of the 450 new bitcoins produced per day, but they’re not adding to liquidity either.

Mara (formerly Marathon Digital) reported a stockpile of 46,734 bitcoins at the end of February, having last year funded new purchases with a MicroStrategy-style issue of convertible notes. Riot Platforms says it makes “strategic purchases” to add to its bitcoin stockpile, which stood at 18,692 bitcoins at the end of February. Core Scientific didn’t disclose how many of the mined bitcoin it sold in February, having sold none in January.

When it comes to matching incremental bitcoin buyers with marginal sellers you probably have to look further afield, in places where power is cheap and dollars are scarce, such as Iran and Russia’s frontier territories. Does the US really want to be making open-market crypto purchases of uncertain provenance?

The Bitcoin Strategic Reserve proposal as it currently stands will move another 200,000 or thereabouts of tokens from temporary to permanent deep-freeze, and not much else. When only a sliver of 19.7mn bitcoins in existence are in active circulation, the formal removal of an overhang can probably be seen as a positive for the bitcoin price.

Meanwhile, the stockpile plan creates an overhang in all other tokens, from Ethereum to Poopcoin. Compared against the talk last year of the US setting up a crypto SWF capable of paying off the national debt, it’s looking a lot like a bait-and-switch.