Uncle Sam is soiling his britches. And that says so much about how and where you should be invested.
Last week, one of Sammy’s bureaucratic mandarins—Gary Gensler, head of the Securities and Exchange Commission—launched a full-throated attack on crypto. He sued both Binance and Coinbase, the two biggest dogs in the crypto exchange space.
In doing so, Gensler claimed that both exchanges were acting illegally in various ways. Supposedly, they’ve been selling unregistered securities, among other questionable SEC allegations.
This marks an escalation in Gensler’s fight with the crypto industry. He’s previously taken on another exchange, Gemini, the crypto token XRP, also known Ripple, and various other crypto businesses.
But Gensler’s actions make no sense.
Back at MIT, where Gensler was a blockchain professor, he noted that 75% of the crypto market “is non-securities. It’s just a commodity, a cash crypto.” Why, one wonders, would a non-security need to register as a security with the SEC?
And as recently as 2019—before President Biden tapped him as SEC head honcho—Gensler flew to Japan to meet with the head of Binance. Why? To discuss joining the crypto exchange as a paid adviser.
Now, as top cop on the securities beat, it appears Gensler’s philosophical leanings have fundamentally switched…
It seems to make no sense, until you take in the broader picture of Gensler as that mandarin for Uncle Sam.
So Why Is Gary Gensler Suing Crypto Exchanges?
Since March, America has recorded three of the four largest banking failures in its history. Those were just the first bricks to fall from an increasingly crumbling U.S. financial system. Moreover, foreign nations are increasing their efforts to move away from the U.S. dollar as a global medium of trade.
That’s all very bad news for Uncle Sam, though the media hasn’t picked up yet on just how truly bad this is.
The banking crisis is far from over. Many more banks are likely to succumb. Money is fleeing small banks and piling up inside larger banks the government has labeled too big to fail.
At the same time, declining global demand for the dollar puts huge—huge!—pressure on Uncle Sam.
America must sell boatloads of Treasury debt every month just to keep the country from collapsing. As demand for dollars declines, however, demand for Treasury paper declines, too. Which means America has to offer higher interest rates to attract buyers globally and pay ever-larger interest payments on its debt.
This effect ripples through the U.S. economy in a number of negative ways.
Productive money leaves the system so that government can make unproductive interest payments that do nothing to benefit national economic growth. It means higher prices on mortgages and auto loans and credit card balances, which strip consumers of their purchasing power.
As the U.S. faces these challenges, anything that draws money out of the dollar is highly problematic. That includes U.S. citizens converting some of their dollar wealth into, say, bitcoin.
So, the Gensler logic is clear: Crypto—in its current form—represents a clear and present danger to the U.S. dollar. It’s a risk to the stability of America’s highly unstable financial system.
Attacking Crypto At Its Root
Americans are not stupid. They recognize that America is troubled financially.
They want their money in assets that have high growth potential and that shield them from the challenges the dollar represents.
But pulling money from the dollar-based U.S. financial system and sticking that cash into a global-based crypto system represents death for the dollar.
Gensler knows this. And, so, like a faithful pit bull protecting its owner in overaggressive fashion, he’s attacking the crypto industry at its root: Coinbase and Binance, which provide easy systems for moving dollars into crypto’s realm.
Gensler’s “tell” was easy to see in an interview last week with CNBC, when he said, “We don’t need more digital currency… we already have digital currency, it’s called the U.S. dollar. We have not seen, over the centuries, that economies and the public need more than one way to move value.”
Absolute and utter BS. Gensler should return to MIT to teach a class in governmental gaslighting.
Over the centuries, the public regularly sought more than one way to move value when they realized their governments were destroying the value of the local currency.
Hyperinflationary Germany considered using notes tied to the price of rye, a commodity staple at that time. Modern-day Venezuelans are trading video-game tokens amongst themselves to pay for purchases that the toilet paper known as Venezuelan bolivars can no longer afford.
And, of course, gold has forever stood as a better store of value than any currency that any country has ever issued that wasn’t itself backed by hard assets like gold or silver.
So, Gensler is fully gaslighting the nation when he makes such asinine comments.
But in the context of shielding the dollar from its destruction to come, his asinine comments are at least understandable.
What is Gensler’s End Game?
Where does all of this leave us? Own crypto if you want to protect your wealth and generate big profits.
I know that seems like an odd solution when the government is so actively attacking crypto.
But here’s how it always goes: First they resist, then they sue, then they regulate… and then they bring it into the fold.
That is the SEC’s endgame.
It wants to bring the crypto industry into traditional finance as a way to prop up one of the fundamentally weakest currencies in the world. In corralling crypto into the banking system, the money that would leave the First National Bank of Anytown and head to Coinbase or Binance now stays within the banking system.
Coinbase and Binance will fall under banking regulations in some fashion, and the dollars they attract will remain within the banking system to prop up a hobbled currency.
When you see the game in that light, you realize that what we’re going through in crypto right now is the SEC’s “sue them all!” stage.
Next, we’re going to hear about it regulating crypto and bringing the industry fully into the U.S. financial system.
That’s going to be a massively bullish event.
The clarity the crypto industry has long sought, but which the SEC refuses to provide, will have finally arrived. Fears of “crypto going away!” will instantly die. And the world’s leading crypto projects—bitcoin, Ethereum, Polygon, Solana, and so many others—will launch into the mother of all bull markets.
I’m using this moment to put more money to work in crypto because I see what’s coming. If you have spare cash and you can tolerate the extreme levels of risk and volatility, adding bitcoin and other cryptocurrencies to your portfolio is going to play out very well.