We are fast approaching a seismic shift in how we look at stored value and define assets. The meteoric rise of crypto and its impact on financial markets has only touched the knowledgeable few so far, but it is on the verge of transforming the very idea of wealth
The US is preparing to announce a strategic crypto reserve on Friday, March 7. To be honest, the world does not really understand the implications, and where this decision will take us.
The US dollar has been the mainstay of global transactions for decades. But its star has faded in recent years as a multipolar world emerges. This dollar slide into oblivion seems to have been at least temporarily halted thanks to US President Donald Trump’s calls for a crypto reserve and a sovereign wealth fund. Trump believes that by becoming the centre for crypto, the US can regain its financial authority in world markets.
And while the conspiracy theorists suggest that the US gold reserves in Fort Knox might no longer be there, the idea of digital gold becomes more attractive. This can be seen across the globe, as country after country, region after region begin to adopt crypto reserve strategies.
A crypto reserve could function as a powerful hedge against inflation, a persistent thorn in the side of fiat currencies. The US Federal Reserve has printed trillions of dollars in recent years, diluting the dollar’s purchasing power and sparking a sell-off of US bonds and dollars around the world.
The increasing impact of the BRICS nations, who seem intent on going their own way in terms of currency and financial transactions, has created something of a vacuum that has in some part, resulted in stubborn inflation. Cryptocurrencies, like Bitcoin, could offer a deflationary counterweight, or so the thinking goes...
With only twenty-one million Bitcoin in existence [and many of those lost forever] the belief is that about 5% of the total supply of Bitcoin could help to stabilise the US economy, as gold once did [and could still do if there is any left]. When you add the potential for exponentially increasing value, a crypto reserve might go some way towards reducing the US national debt, which has surpassed thirty-four billion dollars in recent times.
The world is taking notice. China, Germany, the UK, and countless other nations are now seriously looking at crypto in a new and different light. Crypto watchers think Bitcoin could easily hit around $ 250,000 once a US strategic reserve is confirmed.
Other coins too, such a Ethereum, Solana, Cardano and XRP are also tipped as potential reserve currencies, which will no doubt lead to a spike in their respective prices.
Could it go terribly wrong? Of course. Crypto and volatility go hand in hand. They always have. But then again, it might just help to usher in a world where fast and free global transactions, and the unhindered movement of digital assets create a more private and secure financial system.
When you add the fact that the US is considering removing capital gains taxes on crypto, you can begin to see how attractive this might be. One thing is certain, a tax-free asset class with huge growth potential that offers privacy and speed of transaction, is not to be sneezed at.
Trump & Co. might just be onto something...
