This is a contributor content by Kadan Stadelmann, operations security expert and Chief Technology Officer at Komodo Platform.
President Donald Trump’s federal crypto reserve is a fantastic financial idea that could change the direction of U.S., and even world, history.
Investors seem to understand the turning point we are at, as Bitcoin prices shot up into six figures once Trump was elected and then began nominating crypto insiders for his incoming administration.
Bitcoin’s most recent price rise continues a trend of monumental appreciation by Bitcoin ever since it was released in 2009 by its founder Satoshi Nakamoto. Seeing the writing on the wall, Trump has also called for the federal government to buy Bitcoin for a Bitcoin Reserve with the idea it would hedge against inflation.
Senator Cynthia Lummis (R-Wyo.) introduced the Bitcoin Act, under which the U.S. would be prohibited from selling Bitcoin for at least 20 years. If the U.S. formulates a Bitcoin Reserve, the U.S. joins countries like El Salvador, Bhutan, and likely others in the nation-state Bitcoin game.
Theoretically, the Bitcoin Reserve would appreciate faster than inflation—perhaps much more so—which could alleviate some of the issues the U.S. government faces when paying down the national debt.
Bitcoin Remains In Price Discovery Mode
The reason why Bitcoin is expected to increase to new and unprecedented levels on the chance a Bitcoin Reserve is established is because Bitcoin remains in price discovery mode, which means the market is still attempting to figure out just how much Bitcoin is worth.
Buyers and sellers have not yet agreed on Bitcoin’s worth. The only thing entirely clear at this point is that the market thinks Bitcoin is worth more than it has been previously worth.
Many analysts believe Bitcoin will reach the market capitalization of gold, which would put the price of a single Bitcoin closer to $1 million.
Many are mistaken in thinking that price action has implications for Bitcoin as a store of value versus as a speculative asset for speculators. The volatility in Bitcoin has been the result of the fact that the world’s first digital asset remains in its infancy. The volatility has decreased and will continue to decrease into the future until it has a relatively stable value compared with its price discovery days.
Bitcoin’s economic worth stems from its status as the world’s only true finite or inelastic asset. No other asset on earth cannot have its production expanded in the face of growing demand. For that reason, a robust infrastructure supports the demand around the asset, the production of which cannot be increased amid ever increasing demand.
Bitcoin as a reserve asset brings transparency to government holdings, unlike gold, the amount of which the U.S. government holds nobody knows. With a Bitcoin Reserve, everything would be far more transparent, since Bitcoin is tracked on blockchain. Countries such as El Salvador and Bhutan have their Bitcoin holdings tracked in a fairly accessible manner.
Bitcoin’s inelastic, highly-secure nature make it an attractive option for a government reserve at a time when fiat currencies are being inflated away by central banks. Moreover, Trump’s incoming cabinet is teeming with crypto allies.
Trump Crypto Cabinet
Trump is also putting together a pro-crypto, pro-Bitcoin cabinet and overall administration. There are many such picks to highlight, but a few are particularly noteworthy.
Howard Lutnick, who Trump picked for commerce secretary, has long been a Bitcoin ally, and his investment bank, Cantor Fitzgerald, owns a 5 percent stake in the crypto platform Tether, which offers a U.S. Dollar-pegged stablecoin. Further, Trump appointed crypto-friendly Paul Atkins as Security Exchange Commission (SEC) chair.
And then there’s Trump’s pick to head the Council of Economic Advisers, Stephen Miran— a vocal critic of heavy regulation on Bitcoin. And Trump also named David Sacks as crypto and AI Czar. Clearly, Trump is putting together an administration friendly to Bitcoin and crypto interests.
Bitcoin Reserve A Revolutionary Economic Policy
The U.S stands to become a global crypto hotspot, making it a hotspot of technological innovation once more. With a Bitcoin Reserve established, the U.S. retakes its place as a global economic superpower.
With U.S. power in clear decline, it might take a hail mary to re-establish American economic might. Trump’s pro-Bitcoin and pro-crypto policy might be that hail mary.
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