What is strategic about a bitcoin reserve?
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WHAT IS STRATEGIC ABOUT A BITCOIN RESERVE?
Bitcoin has surged since Trump's re-election in November - rising from below $70,000 on Nov. 5 to a record above $108,000 on Tuesday - on two hopes:
1/ A more crypto-friendly regulation environment
2/ The building of a strategic bitcoin reserve
The first seems well justified.
"Not only has Trump promised to deliver a friendlier policy environment, but this fits neatly with his broader "made in America" platform," writes Will Denyer, partner and chief U.S. economist at Gavekal Research.
The second might be more difficult to achieve and Denyer questions the purpose of a strategic bitcoin reserve, but admits that if it were to get off the ground, the extra demand and reduction of available supply should support bitcoin prices, all things being equal.
"It is hard to envisage a crisis in which a strategic bitcoin reserve would be genuinely useful, other than perhaps a collapse of confidence in the dollar," Denyer says.
In fact, Denyer thinks it could be counterproductive for the U.S. government to buy bitcoin to insure against a fiat currency breakdown.
"At a certain level, buying bitcoin amounts to making a bet against the dollar - which investors may see as a bad signal," says Denyer.
"It is hard to make the case for simultaneously starting a new government purchase program to build up stockpiles of an asset that would only be useful in a crisis of the government's own making."
"The risk of those betting on a Strategic Bitcoin Reserve is that Trump and congressional Republicans ultimately come to this conclusion."
(Samuel Indyk)
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