Crypto’s Day in the Sun

Pssst.  Want an investment that was up more than 100% in 2024?  An investment that the incoming president has promised to buy as part of the U.S. government reserves, and which a number of U.S. states (mostly those run by conservative governors) are eyeing as a potential investment for their pension plans and reserve deposits?

This ‘investment opportunity’ is bitcoin, the cryptocurrency traded on the blockchain, which has become the darling investment of the technology billionaires who seem to have great influence on the incoming Trump Administration.  Some see bitcoin as a future replacement of the dollar as the world’s reserve currency.

One of the most ardent proponents of the dollar-replaced-by-bitcoin concept is Russian president Vladimir Putin, whose regime has begun using bitcoin in international transactions as a way to evade Western sanctions that followed the invasion of Ukraine.  

Another bitcoin fan is the government of El Salvador, which has made bitcoin the country’s legal tender.  Bitcoin now makes up a large percentage of the country’s strategic reserves.  

Bitcoin—and, indeed, all the cryptocurrencies (and there are thousands of them)—has value only so long as enough people believe it has value.  That shared belief is the only thing that backs any valuation above zero, and today it appears to be stronger than ever.  The interesting question is whether the U.S. government, a few foreign governments, some of the states and millions of investors will enjoy a return based on growth in that shared belief that they’re now contributing to.  

The alternative could be a shared disaster.

Sources:

https://www.forbes.com/digital-assets/assets/bitcoin-btc/  

https://www.reuters.com/markets/currencies/russia-is-using-bitcoin-foreign-trade-finance-minister-says-2024-12-25/

https://www.reuters.com/markets/currencies/el-salvadors-bitcoin-wallet-be-sold-or-discontinued-after-deal-with-imf-official-2024-12-19/