The Future of Bitcoins…

In September, two notable events related to Bitcoin occurred. First, President Biden suggested requiring that all sales of Bitcoin over $10,000 be reported for tax purposes. Second, the Securities and Exchange Commission (SEC) approved an Exchange Traded Fund (ETF) tied to Bitcoin futures. More ETF applications are likely to follow. ETFs are particularly interesting because they enable both margin-based (borrowed money) investing and the ability to sell short — essentially betting against Bitcoin.

Although the government is not officially promoting Bitcoin, these developments lend it credibility. So does the participation of Wall Street firms. These institutions aren’t actively recommending Bitcoin, but they are facilitating its trading and recording — earning fees along the way. In that sense, they act as enablers.

An “enabler” is someone or something that either actively supports or, through action, lends legitimacy to an idea. While the term has taken on negative connotations in some contexts, whether an enabler is good or bad really depends on the merit of the idea being enabled. Some organizations believe Bitcoin and similar technologies have a bright future. Still, the ultimate trajectory of Bitcoin remains uncertain.

Structurally, cryptocurrencies resemble Ponzi schemes: they are not backed by physical assets, and current sellers are paid with money from new buyers. In traditional Ponzi schemes, this structure is hidden, and its revelation usually leads to collapse. Bitcoin, by contrast, openly acknowledges this dynamic — making its survival and legitimacy a more complex topic.

It’s worth noting that not all Ponzi-like systems fail quickly. Take Social Security, for example. The government collects payments, doesn’t invest them for future use, and spends them immediately on current recipients and other programs. Yet Social Security works — because the government has the authority to mandate contributions and print money.

Bitcoin’s proponents seem to frame it as a voluntary, decentralized alternative to government-backed currencies. Other key drivers include the potential for wealth creation, tax and regulatory avoidance, and a growing distrust of traditional government systems worldwide.

Katz Family Financial