As a seasoned researcher with over two decades of experience in the field of economics and finance, I find the recent discussions surrounding Bitcoin as a reserve asset by central banks and governments intriguing. Having closely followed the evolution of digital currencies, I’ve seen firsthand how Bitcoin has matured from an experimental concept to a potentially powerful financial tool.
In simpler terms, a recent research article from the Bitcoin Policy Institute named “The Case for Bitcoin as a Reserve Asset” proposes that central banks consider holding Bitcoin (BTC) as part of their reserves to protect against inflation increases, geopolitical uncertainties, potential control of capital, sovereign debt defaults, bank collapses, and economic sanctions imposed by the U.S. government.
Author Matthew Ferranti argued that Bitcoin serves as an effective tool for portfolio diversification because it has a relatively low correlation with other traditional financial assets.
In addition, the economist emphasized that one advantage of Bitcoin is its absence of counterparty risk, making it a useful safeguard against sovereign defaults and potential financial penalties, such as sanctions. This type of default, referred to as “Selective default,” has been observed in countries like Venezuela and Russia.
In simpler terms, Ferranti explained that while Bitcoin and gold may not suit every central bank’s needs, they share similar characteristics – acting as a store of value and offering protection against sudden currency devaluation – much like how gold does.
United States politicians push for Bitcoin Strategic Reserve
According to a report by the Bitcoin Policy Institute, there have been suggestions from potential U.S. Presidents and Congress members for the U.S. Treasury Department to treat Bitcoin as a vital reserve asset.
After ex-President Trump spoke at the Bitcoin 2024 gathering in Nashville, Tennessee, Wyoming Senator Cynthia Lummis proposed the Bitcoin Strategic Reserve Bill within the US Senate. This bill aims to accumulate approximately 5% of all existing Bitcoins over time.
During an interview on Fox News with Maria Bartiromo, Trump suggested that the national debt could potentially be repaid using Bitcoin. This gesture implied recognition of Bitcoin’s unique ability to mitigate and convert inflationary pressures into economic growth due to its limited supply.
Michael Saylor, CEO of Microstrategy and a prominent Bitcoin advocate, likened the Bitcoin strategic reserve initiative to the 21st-century equivalent of the Louisiana Purchase. In essence, this means he sees the Bitcoin initiative as having similar historical significance to when former U.S. President and founding father Thomas Jefferson acquired the Louisiana territories from France for $15 million in 1803. This transaction effectively doubled the geographical size of the United States at that time.
Although many Bitcoin owners favor the concept of using Bitcoin as a strategic reserve, not everyone agrees with this approach. Previously, Charles Hoskinson, founder of Cardano, proposed that while adopting Bitcoin as a strategic reserve could increase its price, it might also give state actors control over the Bitcoin network.
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2024-10-26 21:40