Bitcoin as a Catalyst for a New Cold War

Slowly but surely, January 20 is approaching, the day of Donald Trump's inauguration and the new administration's assumption of office. The eyes of the entire world are focused on what Donald Trump will say and do in his first few days. From ending the wars in Ukraine and Gaza to potentially taking over Greenland, the Panama Canal, and even Canada itself, anticipation is high. The economy, too, expects growth, primarily through tax cuts and reduced regulatory obligations. However, unlike all previous inaugurations, which are significant events in themselves, given the importance of the U.S. and the president's constitutional powers - this one is unique in another way. Namely, never before in the history of cryptocurrencies has an event been as highly anticipated as January 20.

In this article, we will analyze why Trump's victory might be the most significant event in cryptocurrency history.

Two weeks after surviving an assassination attempt, Trump addressed a Bitcoin conference, declaring the U.S. would become the world's cryptocurrency and Bitcoin capital. He announced that the U.S. government would never sell a single Bitcoin, that pro-crypto regulations would be implemented, and most notably, that the U.S. would establish strategic Bitcoin reserves, modeled after existing gold and oil reserves.

Pro-crypto politics significantly contributed to Trump's victory, especially given that the crypto community is younger, tech-savvy, urban, and, by definition, has historically leaned toward Democrats. Key figures in his administration, including Elon Musk, Vivek Ramaswamy, J.D. Vance, Scott Besant (Treasury Secretary), Paul Atkins (SEC Chair), and RFK Jr., are pro-business and pro-crypto. With such monumental promises and even greater expectations, all the ingredients for a significant bull run in the cryptocurrency market seemed to be present. But when something appears too certain, is it always the case?

However, history teaches us that when market expectations are high, the actual outcome may not always meet those expectations. Many investors have already taken long positions, effectively betting on the anticipated outcome.

While short-term considerations like historical price movements and the time elapsed since the last Bitcoin halving are relevant, this analysis will explore a different perspective: that Trump's victory ushered in a new era where existing market paradigms no longer fully apply.

• Bitcoin ETFs: The approval of Bitcoin ETFs in January 2024 allowed Wall Street and institutional investors to enter the Bitcoin market, previously inaccessible. Bitcoin ETFs have become the fastest-growing ETFs in history. BlackRock's Bitcoin ETF amassed more assets in less than a year than its Gold ETF did in two decades. Ethereum ETFs followed suit, and discussions regarding Solana and XRP ETFs gained traction.

• Bitcoin in Corporate Treasury Strategies: An increasing number of companies are incorporating Bitcoin into their treasury strategies to preserve capital. These strategies aim to: Outpace inflation, measured by the Consumer Price Index (CPI). Outperform the S&P 500, which historically averages a 10% annual return.

Bitcoin's average annual growth of 100% over the past decade has made it a standout asset for capital preservation. No other asset has exhibited such rapid growth over this period.

• Strategic Bitcoin Reserves: A key factor hinges on creating strategic Bitcoin reserves. Even after his election, Trump reiterated his commitment to this initiative. These reserves would serve two primary purposes for the U.S. government: To profit from Bitcoin's value appreciation, driven by its capped supply and the increasing money supply. Historically, Bitcoin's value has tended to rise while the dollar's value has declined. To maintain U.S. global dominance in a future digital economy dominated by cryptocurrencies and central bank digital currencies (CBDCs). Drawing a parallel to the Bretton Woods Agreement of 1944, where the U.S. amassed significant gold reserves before establishing the dollar as the global reserve currency, Bitcoin reserves could pave the way for a new global financial order.

If the U.S. establishes Bitcoin reserves, other countries are likely to follow suit to maintain their competitiveness in the new digital economy. This parallels the rationale behind nations maintaining gold reserves today – as a hedge.

• Crypto Regulation: The U.S. government's introduction of favorable crypto regulations, particularly focusing on stablecoins, is another significant promise. While the EU's comprehensive Markets in Crypto Assets Directive (MiCA) has proven overly burdensome, discouraging promising crypto projects, the U.S. has the potential to become the global crypto capital by enacting more conducive regulations.

Conclusion:

Trump's victory may have acted as a catalyst for not only the most significant bull run in cryptocurrency history but also a new era for the industry. An era where cryptocurrencies become integrated into national strategic reserves, and corporate treasury strategies, and become a globally accepted, regulated asset class.

However, the biggest risk lies in Trump's failure to deliver on his promises or deliver them in a way that the market does not anticipate. Despite potential delays or unmet promises, the long-term trajectory of cryptocurrencies appears firmly set, with or without American leadership. Countries within BRICS, for example, may assume a leading role in a financial system that moves away from dollar dominance.

Bogdan Vujovi?

Legal Advisor & Brand Ambassador

Crypto12