Governments and banks once made fun of Bitcoin. Now they want to join it. crypto
Bitcoin has proven to be one of the best performing assets in modern history.
The value of cryptocurrencies has increased nearly 1,000 times over the past decade, far more than US stocks and real estate.
Buoyed by United States President-elect Donald Trump’s crypto-friendly stance, Bitcoin’s record rally hit a new high of $107,000 on Monday after the Republican reiterated his intention to create a Bitcoin strategic reserve.
Bitcoin, the first decentralized digital currency, was invented by the pseudonymous Satoshi Nakamoto in the wake of the global financial crisis of 2007–2008.
Nakamoto introduced the blockchain system – a digital ledger that stores transactions in a network of computers – enabling anyone to conduct financial transactions without the involvement of banks, financial firms or governments.
Once widely ridiculed as a speculative asset with no intrinsic value, Bitcoin is being taken seriously by governments, financial institutions, and investors alike.
London-based fintech analyst Boaz Sobrado said Bitcoin has transformed from a niche asset favored by political dissidents and criminals carrying out illegal transactions to something that “central banks have to take into account and consider”.
“The IMF has implemented very strict anti-crypto political guidelines when interacting with countries that may need its assistance. “This has gone from being an academic question to a practical, real question and central banks are now taking it very seriously,” Sobrado told Al Jazeera.
In January, the US Securities and Exchange Commission (SEC) approved a Bitcoin ETF (exchange-traded fund), allowing investors to invest in the asset on a stock exchange for the first time.
In an October report, the US Treasury Department referred to Bitcoin as “digital gold,” noting its use as a store of value.
Many countries have placed big bets on cryptocurrencies.
El Salvador has amassed approximately $600 million worth of Bitcoin reserves and is one of a handful of countries, along with the Central African Republic, that accepts the asset as legal tender.
Other countries, including the US and the United Kingdom, have acquired large holdings of Bitcoin through the seizure of assets involved in criminal activities.
The US has seized at least 215,000 bitcoins since 2020, worth about $21 billion at current prices, according to an analysis by crypto firm 21.co.
With Trump returning to the White House, Bitcoin supporters hope the cryptocurrency will gain unprecedented legitimacy after years of government-led crackdown on the sector.
Despite once labeling Bitcoin “a scam”, Trump has emerged as arguably the world’s most powerful advocate for the asset.
After promising to make the US the “crypto capital of the planet,” he has hand-picked a number of high-profile crypto enthusiasts to join his incoming administration, including former PayPal chief operating officer David Sachs as crypto tsar and Paul Atkins as SEC Chairman.
Trump’s pro-crypto stance has found allies in the US Congress, such as Cynthia Loomis, a Republican senator from Wyoming, who earlier this year introduced the Bitcoin Act of 2024, which would peg Bitcoin to long-term reserve assets like gold and oil. Will be included. -Term store of value.
Under Loomis’ plan, the government would buy about 200,000 bitcoins each year for five years, and then hold the asset for 20 years as a hedge against inflation.
“If we did this with five percent of all the bitcoins that ever existed — which is about a million bitcoins — we could halve our debt in 20 years,” Loomis said in a television interview with Fox Business.
On Wall Street, ridicule and mockery have also given way to more positive valuations.
BlackRock CEO Larry Fink, who once described Bitcoin as “an index of money laundering,” said in January that the commodity is “no different than what gold has represented for thousands of years” and is “an asset class that is your Protects”.
‘Position of resistance’
According to Max Kaiser, senior Bitcoin advisor to El Salvador President Nayib Bukele, the main feature of Bitcoin that makes it revolutionary is that it separates money from the state.
“This is the first time in history that money exists with no central authority controlling it. That’s what makes it unique, very powerful,” Keizer told Al Jazeera.
“There is now a growing feeling that the 21st century will be the century of Bitcoin.”
Keizer recognized the potential of Bitcoin early on and advised people to buy it when it was worth only $1 in 2011. That year, he and his wife, television presenter Stacey Herbert, called Bitcoin the “currency of resistance”, and predicted it would top $100,000.
According to Gerald Celente, founder and director of the New York-based Trends Research Institute, one reason Bitcoin’s value has strengthened is the poor performance of economies like Argentina, where inflation soared more than 200 percent last year.
“People were watching their currencies devalue… People were saying: ‘I’m losing all my money, what am I going to do?’ They are not able to buy gold, so they started buying whatever they could in cryptocurrencies like Bitcoin, which kept it strong,” Celente told Al Jazeera.
Since Trump’s election, the price of Bitcoin has increased by more than 50 percent and with the incoming pro-crypto administration, Celente predicts an even bigger rally.
“(The value) may skyrocket, but we don’t think (Bitcoin) will go down too much,” he said.
Crypto proponents argue that Bitcoin’s winning advantage is that its global supply is limited to 21 million.
Unlike central banks, which can print money indefinitely, Bitcoin’s supply remains constant regardless of demand, which has helped boost its value against the dollar.
Futurist and tech investor Armando Pantoja believes the value of Bitcoin will “forever” increase, comparing the purchase of property in Manhattan to the purchase of real estate in Manhattan.
“Bitcoin’s value is not because of the currency, but because of the technology that controls it, blockchain technology,” Pantoja told Al Jazeera.
“In Bitcoin’s blockchain, there is a fixed supply of Bitcoins that go out every 10 minutes, and every four years they halve it. Bitcoin production is decreasing over time.
“Once it reaches the limit, no more can be made… That’s why it keeps growing, every four years when they cut the supply, it’s got positive feedback.” Have to give. “It will have to keep growing to supply the demand.”
Keizer estimates that Bitcoin will be worth $1 trillion in the coming years, with a market cap at least equal to gold’s market cap of $20 trillion.
“That would be a $1ma coin. I think this would be a conservative estimate of the price for the next three to four years,” he said.
However, Bitcoin’s meteoric rise has not convinced everyone.
Despite its recent rally, the commodity remains extremely volatile.
After reaching $107,000 at the beginning of the week, the asset had fallen below $97,000 by Friday.
Many financial analysts view Bitcoin as a bubble and there is little to support its astonishing growth.
“The more resources Americans misallocate to #Bitcoin and #crypto-related businesses, the fewer resources we will have to create the things we actually need,” Peter Schiff, chief economist at Euro Pacific Capital, said in a post on Will be available.” ,
“The end result will be a larger trade deficit, a weaker dollar, higher inflation and lower living standards.”
Even though Trump’s positive stance toward Bitcoin has thrilled crypto enthusiasts, some crypto-supporting governments have tempered their support for the sector.
El Salvador announced this week that it will privatize or shut down its cryptocurrency wallet “Chivo” under the terms of a $1.4 billion loan deal with the International Monetary Fund (IMF).
Bukele’s government also agreed to make the acceptance of Bitcoin by businesses voluntary, in moves to address the IMF’s concerns about Bitcoin-related risks.
central bank digital currencies
Some crypto proponents see governments and central banks playing a leading role in the global march toward digital currency with the development of their own currencies.
For example, the US could create its own digital currency as a way to pay off its federal debt, Celente of the Trends Research Institute said.
“There is no way America can pay off its $36 trillion worth of government debt. They could come up with a new cryptocurrency as part of a CBDC (central bank digital currency),” Celente said.
“You’re seeing more and more central banks talking about CBDCs, they’re definitely going to move in that direction,” Celente said.
“They are going to use this as an excuse to come up with a coin because they can’t pay off the debt that they have right now. They’re going to say, ‘This (digital currency) is worth much more than the dollar, the yuan, the euro,’ and use it to pay off their debt.
Some observers have warned that the introduction of a CBDC would open a floodgate of problems related to government control and monitoring of people’s finances.
Trump’s choice for Commerce Secretary, Howard Lutnick, is the CEO of Cantor Fitzgerald, which manages the US Treasury reserves that back Tether, the largest stablecoin by market cap.
Stablecoins are cryptocurrencies that are pegged to a traditional commodity or currency to maintain a stable price. They have reached record amounts of more than $200 billion in total market capitalization.
Sobrado said there could be an opportunity for Tether to become the national de facto privatization CBDC for the US and for smaller economies like the UAE, Hong Kong, Singapore and Switzerland to issue their own CBDCs.
“The pro-crypto voices and the Fed-critical voices in the White House have never been louder,” Sobrado said.
Celente said he has no doubt that the future of money is digital.
“There’s no question,” he confirmed.
