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Bitcoin

“When the situation was manageable it was neglected,
and now that it is thoroughly out of hand we apply too
late the remedies which then might have effected a cure.

There is nothing new in the story.

It is as old as the Sibylline books.  It falls into that long, dismal
catalogue of the fruitlessness of experience and the confirmed
unteachability of mankind.  Want of foresight, unwillingness
to act when action would be simple and effective, lack of clear
thinking, confusion of counsel until the emergency comes, until

self-preservation strikes its jarring gong.  These are the features
which constitute the endless repetition of history.”

– Winston Churchill –

On October 31, 2008, Satoshi Nakamoto released his nine-page thesis setting forth the basic structure of the bitcoin network to the world. Everything about Satoshi Nakamoto’s bitcoin brainchild is brilliant. Mining, the rewards, the blockchain…. it’s absolute genius.

After two smaller booms and busts, cryptocurrency experienced its first major crash in 2018, falling over 80 percent over the course of the year. After yet another bubble, cryptocurrency prices crashed 75 percent in 2022, losing $2 trillion of its $3 trillion in market capitalization. However, at the end of 2024, Bitcoin, the dominant cryptocurrency, surged to over $100,000 a unit, an increase of 138 percent from the beginning of the year. Globally, cryptocurrencies now collectively have a market capitalization of almost $4 trillion.

Although we really do believe the concept of bitcoin is brilliant, we agreed with JPMorgan Chase CEO Jamie Dimon when he said, “I applaud your ability to want to buy or sell it, just like I think you have the right to smoke. But I don’t think you should smoke.”

Mr. Dimon has also said that bitcoin is “worse than tulip bulbs” and once claimed he would fire anyone at JPMorgan who traded it for being “stupid.” At one point he even said of bitcoin, “I think all that’s been a waste of time and why you guys waste any breath on it is totally beyond me. Bitcoin itself is a hyped-up fraud. It’s a pet rock.”

In December 2023, Dimon told the Senate Banking Committee, “If I was the government, I’d close it down. I’ve always been deeply opposed to crypto, Bitcoin, et cetera. You pointed out the true use case for it is criminals, drug traffickers, anti-money laundering, tax avoidance, and that is a use case because it is somewhat anonymous.”

Whether you agree with all Dimon has said or not, it’s a stone-cold fact that the Wild, Wild West that is the crypto grand experiment has been terrifyingly volatile, zigzagging between dazzling rallies and breathtaking crashes – and that isn’t likely to change any time soon since crypto is a nonproductive asset that is not anchored to any actual value. That’s one of the reasons why we believe that, while cryptocurrency is certainly a commodity, it should never be an official currency.

Another reason we believe this is crypto’s vulnerability to hacking, ransomware and straight-up theft. Chainalysis, a research group, reports there was $39.6 billion worth of illicit transactions in 2022 alone. In 2023, that number dropped to $24.2 billion, but only because 2022 included the massive FTX fraud – a debacle that is a perfect example of how easily fraud can be perpetrated in this new arena.

In the FTX scheme, Sam Bankman-Fried, who has been found guilty of seven criminal counts and sentenced to a possible 115 years in prison, took customer funds to buy real estate and other venture investments, as well as for corporate sponsorships and political donations. A large chunk of the money went to cover losses at Alameda Research, a FTX associated hedge fund, after crypto prices plunged in 2022.

For these reasons and many more, the United States government CANNOT, UNDER ANY CIRCUMSTANCE, be in the crypto business. NO taxpayer money should ever be used to purchase it or be used as a backstop for what amounts to purely speculative bets.

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