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BITCOIN STRATEGIC RESERVE:
Think of this like a country-wide ‘fund,’ where stockpiles of certain items are kept safe, in excess, for a time where they might come in need, and to prevent prices from suddenly spiking higher in the event of a shortfall. Recently, proposals have called for “A Bitcoin Reserve” that could potentially be used as a hedge against inflation, and a long-term store of value – if the United States accumulates enough of it.
The thinking is that there’s a limited supply of 21 million, meaning – demand is likely to continue increasing, while no more Bitcoin will ever be produced. Second, it’s decentralized – so, no ONE entity ‘controls it.’ Third, it’s been compared to a ‘Digital Gold,’ making it similar to what we already have, and Fourth – many other countries are already embracing it.
This is why Trump Tweeted: My executive order will move forward on a strategic reserve that includes XRP, Solana, and Cardano…I will make sure the US is the crypto capital of the world! And, obviously, Bitcoin and Ethereum, will be at the heart of The Reserve.”
THE PROBLEMS:
Critics argue Cryptocurrency doesn’t quite have ‘an essential use case,’ as in – it won’t directly help support the economy in times of turmoil
Second: In the event of a price drop, the government might be expected to intervene – or, continue buying in to keep the price elevated.
Third: Some people have voiced concerns about whether Cryptocurrency would benefit the country, as a whole – or simply provide an economic backstop to private investors who want a high return on their investment.
Fourth: A security issue would be absolutely disastrous.
However, proponents of a ‘Strategic Reserve’ say that it should JUST include Bitcoin. For example, the CEO of Coinbase tweeted: “Just Bitcoin would probably be the best option — simplest, and clear story as successor to gold…If folks wanted more variety, you could do a market cap-weighted index of crypto assets to keep it unbiased. But probably option #1 is easiest.” Tyler Winklevoss said that other cryptocurrencies aren’t suitable for a reserve, and that – only ONE digital asset in the world right now meets the bar… and that digital asset is Bitcoin.”
In terms of WHY Bitcoin has value, Investopedia notes six attributes that all successful currencies MUST have:
* Scarcity
* Divisibility
* Acceptability
* Portability
* Durability
* Uniformity
As it turns out, Bitcoin ranked highest in every single category, with the exception of being issued by a Government (which, one could argue is actually for the best). It’s for THAT very reason that so many people see Bitcoin as a beacon of freedom and a way to break away from traditional finance.
All of this gives perfect reason for the United States to create their own Reserve, scoop up as much Bitcoin as they can, and then – use that to back the dollar.
So, while something like Bitcoin has it’s purpose and it could ONE DAY be worth a lot of money – for the near future, it’s going to behave similar to nearly every other ‘stock market investment’ – and that needs to be considered, since – up until now, its followed the overall trend of the NASDAQ.
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