How the govt. can ‘hedge against a world where there’s a Bitcoin standard’
The gold standard was shrugged off by the United States a long time ago. However, the precious metal has remained a primary hedge, not just for personal investors, but also for sovereign funds. While the United States dollar has acted as an exchange standard for most countries since, a depreciation in its value due to rising inflation has led to many looking for an alternative avenue. That’s where the top cryptocurrency Bitcoin steps in.
Many believe that the dependence on gold will first have to be eradicated for Bitcoin to reach its full potential. However, CoinMetrics’s Nic Carter has suggested a strategy for their co-existence. During a recent interview, the investor opined that BTC and Gold belong to the same ideological family while sovereign currencies are from a different genus. Thus, a tussle between the two assets seems unnecessary.
Bitcoin has its own merits like transmissibility, auditability, fractionalizability, and easier storage options. Gold’s momentum comes from its ownership by most sovereigns. Therefore, according to Carter, completely doing away with it might include a multi-decade transition phase.
In the meantime, countries should start preparing for a global Bitcoin standard, the exec said, before adding,
“Buy the equivalent amount of Bitcoin that you hold in your official gold reserves… all you need to do is hedge against a world where there’s a Bitcoin standard.”
He also opined that this will leave countries in a similar position as they are now, where “where gold is the de facto monetary good the governments hold.”
Carter also suggested a strategy for the U.S, which currently owns around 4% of the total gold that has ever been mined. According to him, such a ratio would require it to acquire less than a million BTC out of the total 21 million that will ever be in circulation. This will cost the country “less than $50 billion.”
“Now that’s a pretty cheap option to get into the future.”
The Castle Island Ventures exec believes that this process has already been started by several countries, albeit in a coveted fashion as it will keep their costs basis in check. He argued,
“Any government that is acting on a decades-long time frame and is secretly hedging their exposure by getting access to Bitcoin in whatever method, they have no incentive to talk about it.”
However, reports of several governments, often “despotic or autocratic,” secretly acquiring Bitcoin have already started to surface. It has been alleged that state-sponsored North Korean hackers have been stealing billions in cryptocurrency for the government to build its treasury.
Similarly, while imposing restrictions on citizens, the Venezuelan army began crypto-mining last year to generate “un-blockable” income that can bypass U.S sanctions.
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Anjali Jain, Khareem Sudlow