Bitcoin at $5 Million? It’s Closer Than You Think…
Horace Rackham walked into Michigan Savings Bank with a question: Should he take advantage of the investment opportunity he’d been offered?
The banker assured Rackham that he’d be a right sap for pursuing the opportunity. The banker’s exact quote was reportedly: “The horse is here to stay but the automobile is only a novelty—a fad.”
That was 1903.
Rackham was the lawyer Henry Ford hired to draw up the legal documents for a new, eponymously named automobile company in Detroit. Ford told Rackham he could invest in the automaker, if he wanted to, but Rackham wasn’t too sure about this flighty idea. A banker would know better.
Rackham followed the banker’s advice… temporarily. But then he had a conversation with Alexander Malcomson, a coal baron who was helping Ford raise money. Malcomson convinced Rackham to part with $5,000.
And that $5,000… well, it quickly grew into $12.5 million, the equivalent of about $170 million today.
The moral: Experts are not always experts.
Sometimes, they’re just smaller thinkers peddling bum advice.
Which brings us right ‘round to so much commentary I’ve been reading recently about bitcoin, the US dollar, and whether the king of crypto could ever replace the king of currencies—or even morph into a reserve currency in its own right.
The widely held consensus is that anyone who thinks bitcoin will ever be a reserve currency, much less replace or back the dollar, is an anti-social delinquent better suited to a role in A Clockwork Orange than freely wandering the streets of a modern economy.
Some Motley Fool scribe earlier this summer, for instance, insisted that the answer to the question, “Can bitcoin replace the dollar… of course, is no.”
A shallow-brained writer over at Business Insider lambasted bitcoin because it “hasn’t delivered on its promise to replace money. It’s just created a new way to gamble.”
As you might imagine… I have thoughts.
Question: Why do central banks hold gold?
Nothing trades in gold anymore. It’s not like any central bank needs a stockpile of gold to facilitate trade with another nation, which was once a primary reason for holding gold. And not a single currency in the world today has gold as a backer to assure users that the paper holds value beyond what some sketchy government claims it’s worth.
No—banks still hold gold, a physical money, as a hedge against fiat currencies, a form of paper money with literally zero intrinsic value.
More impertinently—aka, more accurately—they hold gold because the dollar is doggie doo.
Of course, the world still runs on dollars, which means the world economy is at the mercy of the US dollar, for now.
But central bankers are up to speed on their old adages—namely: The bigger they are, the harder they fall.
And when the dollar falls, it’s going to shake global foundations.
As a central banker, then, you want to protect your own economy as best you can. And gold is the single best way of doing that, since no government controls gold.
But then along came bitcoin…
Early on, bitcoin was a novelty. A digital fidget spinner for techno-nerds who liked to build mining machines and pontificate on who Satoshi Nakamoto (bitcoin’s creator) might be.
Today, bitcoin is increasingly taking on the role that Satoshi envisioned in the quote he attached to the very first bitcoin ever mined: “Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Satoshi’s message was clear: Governments cannot be trusted to protect the people from the egregious greed of bankers who regularly destroy economies.
What looked bad in 2009 is horrific in 2025.
Global sovereign debt that was just under $50 trillion in 2009 is now above $100 trillion… and growing non-stop.
America is the most aggressive offender. Uncle Sam’s cumulative borrowings that were right at $12 trillion in 2009 now exceed $37 trillion—a tripling—and will approach $45 trillion by the end of the decade.
Anyone who holds the idea that any currency can sustain such debt and sustain its role as a reserve currency… well, that’s the person who needs a cameo in A Clockwork Orange.
America’s national debt will, at some point—guaranteed—threaten the dollar’s status as reserve currency. At some level, that’s already happening as central banks all over the world back away from the dollar, add more and more gold to their reserves, and as they launch all manner of test projects aimed at building crypto-based blockchain processes that allow countries to bypass the dollar and to trade faster, more efficiently, and more cost-effectively amongst themselves.
Meaning, dollar hegemony is absolutely at risk, at least to anyone who’s paying attention.
Bitcoin could very well mitigate that risk, something Donald Trump is onto when he talks about a Bitcoin Reserve Fund.
Assume for a moment that the US government accumulates 5% to 10% of all the bitcoin in existence—at most that would be 2.1 million bitcoin since only 21 million will ever exist.
And let’s assume that bitcoin rises to $5 million…
I know that sounds like a preposterous number to 99% of people. But there are very smart bitcoin investors on Wall Street who see $5 million as a certainty.
I do, too.
Precisely because I fully expect the US will adopt bitcoin as a backer for America’s deeply troubled dollar.
When the foundation of a house cracks in a manner that subjects the house to potentially catastrophic structural failure, you shore up the weakness by repairing and strengthening the foundation.
America will do the same for the dollar. It’s the only viable option that preserves the dollar’s role in the world.
At BTC $1 million, a US strategic reserve of 2.1 million bitcoin would be worth $2.1 trillion, or about 5% of the roughly $40 trillion in debt America will have. At BTC $5 million, America’s holdings would amount to $10.5 trillion, or about 25% of America’s debt.
The world would smile at that.
As I see it: The government—likely under Trump—will revalue America’s gold holdings (which will effectively revalue gold globally). And it will accumulate bunches of bitcoin.
And at some point, the Fed and the Treasury will announce that America is recalibrating the global financial system by leaving behind the old Nixon-era fiat dollar and returning to a dollar backed to a certain degree by the newly revalued hoard of gold America owns, and America’s Strategic Bitcoin Reserve.
The world will follow suit.
It will have no other choice.
Those of us who own gold and bitcoin at that point, well, we’re going to be a lot like Horace Rackman—who came to his senses and realized the expert was a buffoon.
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