Tianfeng Song Xuetao: Why does Trump want to tie Bitcoin?

AIAIWith the issue of trade and manufacturing efficiency, the US economy will increasingly rely on deficit monetization. Once a certain threshold is surpassed, a debt spiral will occur, and the hegemony of the US dollar will be accelerated weakened. Therefore, Trump's second term governance ideology is very clear, aiming to improve production efficiency and government financial efficiency through AI, to steer the US away from stagflation and maintain the global recognized status of the US dollar as a reserve currency. In this process, Musk will play an important role, so Trump is elevating Musk's political position to become the most important figure by his side, and Musk has already had a direct impact on US government budget legislation.Once it fails, the US dollar may not only depreciate relative to gold, but may even further undermine its status as a global reserve currency and sovereign credit currency. Although the probability of this happening in the short term is low, this kind of erosion often accelerates suddenly at some point. Historically, the transition of great power status often goes through long periods of parallelism and competition, and the final transfer of power is completed in a short time. Therefore, Trump needs to formulate a Plan B to maintain the status of the US dollar in order to deal with the situation where AI technology fails to improve productivity, reduce fiscal deficits, lower inflation, and narrow the wealth gap, and this alternative plan is Bitcoin. Although there is currently no currency that can replace the US dollar in the short term, linking Bitcoin with the US dollar can be seen as a hedging strategy to protect the status of the US dollar. Once the global reserve currency status of the US dollar is seriously threatened, the United States can at least weaken the position of gold by controlling Bitcoin and continue to maintain the currency status of the US dollar. Energy is the key to technological revolution After meeting with several executives of cryptocurrency mining companies, Trump proposed in June 24 to make Bitcoin completely "Made in America." Energy, as a key limiting factor in Bitcoin mining and trading, is self-evident in its importance. Bitcoin's energy consumption is entirely dependent on electricity supply. According to estimates from the University of Cambridge in the UK, the electricity consumption of Bitcoin operations for one year is approximately 172.1 terawatt-hours, exceeding the annual electricity consumption of countries such as Egypt, Malaysia, and Poland. In Texas, where a concentration of cryptocurrency mining companies exists, 10 mining companies consume over 1,800 megawatts of electricity annually. Bitcoin miners tend to seek low-cost electricity supplies to ensure profitability. In 2023, 81% of new renewable energy projects (about 382 gigawatts) produced will have lower costs than fossil fuel projects. Taking photovoltaic power generation as an example, the cost of photovoltaic power generation in 2023 has dropped to around 4 cents per kilowatt-hour within a year, which is 56% lower than fossil fuel and nuclear power generation, thus the rising proportion of renewable energy usage in the Bitcoin mining sector. According to Woocharts data, as of October 24, the proportion of mining using sustainable energy is 56.8%. Historically, the strength of a country is often closely related to its energy production capabilities. For example, technological revolution enabled Britain to make breakthroughs in coal mining and usage, providing a foundation for the long-term status of the pound. The United States has consolidated the global leadership position of the US dollar and the United States by controlling the extraction, transportation, and consumption of oil, as well as influencing global geopolitical matters. Countries that control the advanced production of energy on which they rely stand out in competitions over centuries, from trade to manufacturing, and then to consumption and finance, establishing their dominant status. Today, the constraints of traditional energy are gradually weakening, and new energy sources represented by sustainable energy are rising. For a country, developing and mastering new energy sources become crucial, as low costs, stable and secure sufficient supplies, decentralized deployment, and mobile energy supply systems are important foundations for triggering a new round of technological revolution and productivity enhancement. Therefore, AI represents plan A to maintain the US dollar's position, while cryptocurrencies represent plan B to hedge against the US dollar's position being undermined, but regardless of whether it is Bitcoin or AI, energy is a core element that cannot be bypassed. The essence of currency is credit, the essence of credit is order, the essence of order is technological competition, and the essence of technological competition is energy efficiency. Countries that control new energy sources can lead the application of new technologies, improve productivity, expand the scope of efficient and low-cost applications, and then enhance total factor productivity. Whichever country wins in this competition, once a new order is established, the historical mission of gold representing a major upheaval of a century will be accomplished. Risk Warning Bitcoin development falls short of expectations; Bitcoin fails to help the US maintain currency hegemony; The US successfully uses AI to achieve administrative and productivity efficiency improvement.