When we talk about Bitcoin, we often think of it as a way to step outside the traditional financial system. But what happens if the very institutions we’re trying to get away from decide to jump in? Former top banker and ‘macro-guru’ Raoul Pal has been mulling over this question, and he’s got some concerns.
In a recent chat with Anthony Scaramucci, the founder of Skybridge Capital, Pal raised a few eyebrows by suggesting that the U.S. government might not be the best player to have in the Bitcoin game. If they decide to buy up millions of Bitcoin, Pal thinks we could be in for some interesting—and potentially worrying—times.
The Power Play
Pal points out that the U.S. government has a history of flexing its muscles when it comes to financial markets. If they were to buy a massive amount of Bitcoin, they could wield significant influence over its price. On the surface, having a big new buyer might sound like good news for the crypto market. After all, more demand usually means higher prices. But Pal sees a potential downside.
“Yes, it’s good for the crypto market because a major new buyer enters the scene. But it’s also strange, because Bitcoin was originally created to reduce government control over money. Now, the government would emerge as one of the biggest buyers of that money,” Pal said.
A Terror Tale?
Pal doesn’t stop there. He suggests that if the government did buy up a large chunk of Bitcoin, they could manipulate the market by dumping it whenever they wanted, only to buy more later. This kind of move would mirror how they handle interest rates with fiat currency—something Bitcoin was designed to avoid.
“I don’t really like that. If the government can manipulate it, they could dump it on the market and then buy more without us noticing. They would use Bitcoin in the same way they control interest rates with fiat currency. We don’t want that,” Pal added.
But let’s be real—this scenario seems a bit far-fetched. Why would the U.S. government spend millions on Bitcoin just to dump it? That kind of strategy doesn’t make much sense, especially when holding onto Bitcoin could be more beneficial as more people start using it as a savings tool.
“If you owned millions of Bitcoin, causing a massive dump would be the last thing you’d want to do. It’s better to hold onto the Bitcoin, hoping that more people adopt the digital currency as their primary savings tool,” Pal explained.
The Bigger Picture
If you were in the government’s shoes and held millions of Bitcoin, the last thing you’d want to do is cause a massive sell-off. That would likely hurt your own holdings. Plus, if Bitcoin’s price drops, plenty of other buyers would jump in, making it harder for the government to buy back more Bitcoin at a lower price.
“Dumping Bitcoin in the hope that you can buy back more later seems a bit naive. If Bitcoin drops to a certain price, you certainly wouldn’t be the only one looking to buy,” Pal pointed out.
In the end, it seems more like a ghost story than a real threat. The U.S. government might be able to influence Bitcoin’s price through buying and selling, but controlling it outright? That’s a different story. With Bitcoin’s current setup, there’s not much room for the kind of power play Pal worries about.
“The U.S. government cannot exert real control over Bitcoin, except for possibly influencing the price through buying and selling. Beyond that, with Bitcoin’s current protocol, not much more is possible, and in this respect, the term ‘abuse of power’ doesn’t really apply to the digital currency,” Pal concluded.
So, while it’s always good to keep an eye on what the big players are doing, we probably don’t need to lose sleep over the U.S. government taking over Bitcoin anytime soon. Let’s keep focusing on what Bitcoin was meant to do—give us more control over our money, decentralized, without the usual middlemen.
For the full conversation between the two, you can watch the video below: