Why Sovereigns May Start Buying Bitcoin in 2022

Bitcoin has grown from an “internet currency” used by only a few thousand people in its early years to become part of the balance sheets of large corporations and sovereign nations. El Salvador is a country fully committed to Bitcoin’s mission, putting millions of dollars into the digital asset as a national reserve.

While Bitcoin is still a long way from becoming the de facto reserve currency of all countries, its growth shows that countries can no longer ignore it. This is why more nation-states are expected to buy cryptocurrencies next year.

Fidelity Why Countries Are Buying Bitcoin

in the most recent Report published by Fidelity, which delves into Bitcoin and its possible role in determining which countries are leaders in the world economy. This is because as the asset becomes more widespread as a reserve currency, countries that hold Bitcoin may see their influence higher than those that do not, despite where they may stand today.

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History has always shown that those who are quick to embrace innovations and new technologies always do better than those who don’t, and this is likely the case with Bitcoin and other cryptocurrencies.

Fidelity also calls it “very high-stakes game theory.” If Bitcoin adoption continues to grow, those who get in earlier will undoubtedly be better off than the rest. This will push other countries to also acquire digital assets as “insurance” so that even if they don’t believe in the investment thesis or adopt digital assets, they will not be left behind.

Basically, sovereign nation-states buy Bitcoin as a hedge in case it becomes important in the future. “In other words, a small amount of cost can be paid today as a hedge, compared to potentially larger cost years in the future.”

A blanket ban will be difficult

The report addressed the banning debate raging in the space, explaining that a complete ban on Bitcoin would be difficult to achieve. It added that while not impossible, it would certainly result in a significant loss of wealth and opportunity.

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There has yet to be an all-encompassing bill on cryptocurrencies that provides sweeping regulatory clarity. The infrastructure bill, passed last year and scheduled to go into effect in 2024, continues to make numerous changes, so long from implementation it is unclear where it will end up.

In its report, however, Fidelity noted that the passage of digital asset regulation into law would be a milestone for Bitcoin, stating that “we think it is most notable that digital asset regulation becomes law as the asset class matures and matures. Another milestone. Build yourself.”

BTC trending above $43K | Source: BTCUSD on TradingView.com
Featured image from Bitcoin News, chart from TradingView.com

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