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I like the idea of Bitcoin and have spoken positively about it. A digital, decentralized, trustless, and immutable ledger of transactions where the government cannot steal or confiscate your money is right up my alley. While the fundamental and technical arguments for Bitcoin’s utility and reliability are strong, the more I research the whole picture, the more suspicious I get. Unfortunately, I now believe it is merely a tool to be used to support the US financial hegemony and traditional financial system. The real clues arise when we look beyond Bitcoin itself, into what’s happening with real money (gold) and a not-so-little company called Tether.
To set the stage, the reserve currency status is often called the exorbitant privilege. It wouldn’t be called this unless it was, in fact, a good thing for whoever has it. US leaders have sent mixed signals about the privilege, but you can call their bluff on the negatives very quickly. Economic power is on a similar level to military power, and the US dollar financial system and reserve-currency structure are paramount. The US has done and will do anything in its power to hold onto power and control over the world. Military interventions, trade deals, foreign sanctions, and asset confiscation have all been used and likely will again.
Here I set the axiom that the US global hegemony is dependent on its vast economic influence, and that its leaders, regardless of political affiliation, will defend at any cost. We can look at the world through this lens. To put it succinctly, what if the assets most associated with escaping the dollar system (Bitcoin/Tether) are, like the petrodollar regime, its latest pawns?
Gold
Gold is easy to understand. It is a reserve asset because it is scarce and maintains value over many decades. It failed as money in a globalizing and faster-moving economy, but is still held in higher proportions as reserves by nations that are the most powerful. There is a reason Nixon took away gold convertibility in 1971, because if not, the US might actually have to send away all of the gold holdings. If gold didn’t matter, there wouldn’t be a need to hold onto it. Today, central banks around the world are hoarding gold. They are buying at twice the rate of the previous decade and scooping up a third of freshly mined supply. With the acceleration following the confiscation of Russian reserves in 2022, the primary mechanism is presumably to diversify their own reserve assets away from trust-requiring assets like Treasury bonds.
There is a war of influence going on already between the US and “the countries the US doesn’t like,” such as China and Russia. China is clearly taking the approach to consolidate as many real assets as possible, whether that’s physical gold in central bank vaults or spurring Chinese investment in mining, infrastructure, and manufacturing. Lately, China has taken some unusual steps in the domestic market, including halting paper gold trading. To understand why they would do this, you need to understand why and how the US has been manipulating gold for over a hundred years.
It is in the US’s best interest to manipulate gold because it helps maintain the credibility of the fiat dollar system. With gold spiraling higher, the fiscal irresponsibility would be obvious, likely causing higher interest rates and less demand for government debt. The tremendous financial engineering infrastructure of “paper gold” allows 100:1 to 300:1 paper claims to physical gold. Not everyone is going to demand a costly delivery process of tons of gold each month, so a synthetic supply of paper claims is totally feasible and suppresses the price of gold.
China is not interested in this. First, it wants to devalue the yuan against gold while maintaining capital controls to solve its domestic debt burden, which is a real economic issue. Second, the obvious one is to reduce dependency on US Treasuries, which can be confiscated if the US doesn’t agree with you. Third, these governments have been hoarding gold at suppressed prices, so a sudden revaluation would create a windfall of profits for the nations quietly hoarding.
What does this epic nationwide gold battle have to do with a little crypto company? Bear with me; I will connect the dots.
Tether
Tether is a stablecoin, which means it is a cryptocurrency tied to the value of the real US dollar instead of flailing around violently like Bitcoin, Ethereum, or Dogecoin. While this removes the speculative nature and other draws of regular cryptocurrencies, it makes for a more legitimate asset for tokenization. If real-world items are going to be tokenized, it will be with a currency that matches real-world money.
To do this, when Tether receives a real dollar, it issues a dollar-equivalent unit, UST. Right now, UST is primarily used to purchase other cryptocurrencies on exchanges. Tether takes the real dollars and buys US Treasury bills as collateral.
The company has settled for fraud with the New York Attorney General, and it is unclear the extent of the fraud and whether it is still ongoing. I’m by no means the first to point out how sketchy Tether is (Doomberg 1,2,3,4, Parallel Mike, and Leah). They have done a much better job detailing the MANY issues of Tether than I could in this single section of this article, so I recommend those for further reading if you are interested.
Tether buys Treasuries which pay a yield, and the company actually profits off of the arbitrage of people depositing a real dollar for a UST. This raises the simplest and most obvious red flag. Why would the government allow a random fraudulent private company to so easily arbitrage its own bonds?
If Tether were merely a small unregulated offshore company, it may not matter, but it’s growing. The stablecoin market is projected to reach $2 trillion by 2028, each dollar of which requires Treasury bill backing. Tether uses profits to buy speculative investments in gold, robotics, data centers, media, neurotech, Bitcoin, gold royalties, and Argentinian agriculture. It has become one of the largest holders of gold in the world. Not to mention the deep connection to the files; if you know, you know.
Then, there are the connections to government, where you would expect the government to be anti-crypto and anti-Tether. Last year, the Genius Act was passed, creating a framework for stablecoins, specifically requiring them to be backed by US dollars or Treasuries. A White House official who helped draft the law then became the CEO of Tether US a month later. Further, Secretary of Commerce Howard Lutnick’s firm, Cantor Fitzgerald, is Tether’s custodian of US Treasuries.
“Dollar hegemony is fundamental to the United States of America,” Lutnick said. “It matters to us, to our economy. That’s why I’m a fan of properly backed stablecoins, Tether and Circle.”
A once-in-a-generation opportunity to expand dollar dominance and US influence in financial innovation. - Treasury Secretary Scott Bessent on the Genius Act
The line between private financial innovation and state monetary policy has dissolved. Tether should’ve been a snuffed-out fraudulent offshore entity drawing capital away from the US government through demand for Tether and Bitcoin. Instead, the government is intertwined with it and is legislating with it to ensure that all that capital is still demand for US government debt.
Bitcoin
First, Bitcoin should be an independent asset not dependent on anything else in theory. Bitcoin is priced in Tether (UST), not USD, meaning that if Tether is severely fraudulent, it could have deleterious impacts on the price of Bitcoin if it is found to be manipulated higher through excess supply of UST. The main argument from me is not that. It is that Bitcoin appears to be a Trojan Horse; a jester disguised as the knight in shining armor.
The US government would, in theory, want to ban an asset designed to circumvent government control, yet it owns a sizeable amount with the Strategic Bitcoin Reserve. MicroStrategy is now a de facto Bitcoin treasury company, and CEO Michael Saylor has done great marketing, drawing in capital and demand for the asset. Their behavior is suspicious, issuing aggressive amounts of debt and diluting shares to purchase Bitcoin. BlackRock and other major financial institutions have been granted the ability to issue ETFs. These are the primary draw of capital into markets today, and IBIT and others have seen extreme demand for their products, drawing in billions of capital.
The National Security Agency created some of the basic cryptography innovations, while Coinbase, Tether, and the early days of Bitcoin have close ties with the files, increasing the likelihood of coordination. These aren’t proof but merely something worth keeping in mind. Whether Bitcoin is or is not what the stout supporters suggest is irrelevant; you have to look at incentives and actions. The government shouldn’t be supportive of it, and it is being happily used to keep capital within the Western financial system.
The Gold Scheme
Tether is already a large global holder of gold, with reportedly around 150 tonnes and growing, stored in Swiss vaults. If the US wanted to continue manipulating the gold price, it could sell gold to Tether while being the custodian. The Treasury books cash received, Tether books gold held, and both sides get what they want on paper. If Tether’s usefulness runs out or times change, they can merely confiscate the gold already in their own vault. There's a precedent for this kind of paper reshuffling. FDR confiscated gold at $20.67/oz in 1933, repriced it to $35, and booked the difference as a windfall that capitalized the Exchange Stabilization Fund (ESF), which still exists.
The ESF, notably, can deal in gold without congressional approval, at the Treasury Secretary’s discretion. That’s the legal plumbing that would make a quiet tether/gold arrangement possible. The 2025 Gold Reserve Transparency Act calls for a full accounting of all gold in which the US government has a direct or indirect interest, including gold held by third parties such as the ESF or foreign central banks. If the government is using Tether as a gold manipulation tool, this Act should uncover it. If it comes back clean, we can restore some hope in corruption and confidence in the gold price. On the contrary, if this legislation gets swept under the rug, it could be suggestive that they want this relationship hidden.
The US could also be accumulating foreign gold through Tether in Swiss vaults to hedge against their plan failing and to stealthily accumulate gold. This way, it doesn’t appear that the US has lost faith in its own currency and can hedge China’s gold rebalancing tactics, which will only increase. Tether has already undergone a trial run of a gold-backed currency, the XAUT token. Should gold reemerge in importance, there is already a mechanism to keep capital in a digital gold coin in the US financial system, rather than China’s version.
The Dollar Scheme
While the gold scheme is speculative with some evidence, the dollar scheme is based on actions. The purpose is to issue stablecoins to keep capital in the US dollar system. Tether can maintain credibility by holding safe assets like Treasuries and also hoarding gold like a central bank.
As monetary digitalization proliferates the world, countries will find easier access to US dollars. Despite Bitcoin's long-run price appreciation, foreigners will much rather save in stablecoins than their local hyperinflating currencies. The demand for stablecoins and Crypto broadly will, through Tether, be a mechanism for continued US Treasury demand, required by law.
The manipulation of Bitcoin through leveraged UST collateral, MicroStrategy marketing, and BlackRock institutional trust to entice investor capital into Bitcoin. Legislation like the Clarity Act passing someday may increase the legitimacy and capture of the industry. By legitimizing Bitcoin, all capital flows into Bitcoin are not capital flows into gold, and thus are maintained in the US financial system.
Tether’s intimate connection with the US government and elites allows the unlikely rise to make more sense. It’s not about financial innovation, but stagnation. I want to love Bitcoin, but whether Bitcoin and Tether genuinely started as a fair and noble creation or an elites/government ploy is irrelevant; it is now clear it will be used by the US to defend its economic power, to manipulate capital flows and gold.
This does not mean avoiding the assets entirely, but knowing where to be and when is critical. History is full of examples with changing monetary regimes. I’ve written about the past two in Tumultuous Times Pt 1 and Pt 2. Now more than ever, it is vital to understand which assets to own, when, and with risk tolerances. To learn how to manage risk and the changing monetary regime, consider upgrading for access to the Gray Area Model Portfolio.
-Grayson
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For educational and entertainment purposes only. The Gray Area should not be taken as financial advice.