As the cryptocurrency community anticipates the next move by the incoming Donald Trump administration regarding the potential to roll out of a Bitcoin (BTC) reserve, an economist has cautioned that such a move could negatively affect the economy.
According to Steve Hanke, a professor of Applied Economics at Johns Hopkins University, establishing Bitcoin reserves is “the stupidest” idea. He argued that diverting savings into digital assets like Bitcoin would harm economic productivity and growth, he said in an X post on January 6.
The post, accompanied by a video extract from Hanke’s interview with Jeremy Lin, saw the scholar explain that savings in Bitcoin are not used to fund real capital assets that drive production.
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Instead, these funds simply sit idle, similar to purchasing old art, without contributing to tangible projects that improve productivity.
Economic prosperity rooted in productivity, not speculation
Hanke emphasized that economic prosperity and improved living standards are rooted in increased productivity. He warned that failing to invest in productive assets could have long-term consequences for financial health.
“It diverts weighting and savings into old masters that just, it just sits there and is never invested in bankable projects that actually produce anything and increase productivity in the economy.<…> I’m completely opposed to it. I think it’s the stupidest idea,” he said.
It is worth noting that Hanke has been a long-standing critic of Bitcoin and has opposed governments that embrace digital assets. For instance, he was among the vocal critics who predicted doom for El Salvador’s economy after the country declared Bitcoin as legal tender.
Among his more notable recent comments on Bitcoin, in 2024, Hanke referred to cryptocurrency investors as “psychopaths,” citing findings from a psychological study conducted by researchers at the University of Toronto.
Mixed reactions on Trump’s Bitcoin reserve idea
Ahead of Trump’s inauguration, the President-elect has made moves to appeal to the crypto community, such as nominating cryptocurrency-friendly regulators. However, his stance on establishing a Bitcoin reserve continues to draw mixed reactions.
At the same time, the odds of Trump making such a move within his first 100 days in office have diminished, particularly in betting markets. According to Polymarket, there is only a 31% chance the United States will have a Bitcoin reserve by April 29.
Overall, there has been increased pessimism regarding establishing a Bitcoin reserve. This sentiment was heightened by comments from Federal Reserve Chair Jerome Powell, who noted that the institution is not allowed to own Bitcoin. These remarks caused Bitcoin’s price to plunge significantly.
Trump and his allies aim to position the U.S. as a global leader in Bitcoin and cryptocurrency, and a reserve is viewed as one of the key starting points.
Featured image via Shutterstock
