Not allocating Bitcoin could be riskier for nations than accepting it

Fidelity’s latest report predicted that nation states, central banks, sovereign wealth funds and government treasuries could strategically position themselves in the cryptocurrency market by 2025. The prediction follows the approval and launch of commercial products in spot Bitcoin (ETP) exchange in 2024, which led to significant demand from institutional and retail investors.

This new accessibility has streamlined Bitcoin allocations, bringing pensions and endowments into the fold and signaling broader institutional acceptance of the digital asset as described by the asset manager.

Bhutan, El Salvador: A Playbook for Nation-State Bitcoin Success?

Historically, nations like the United States and China have held onto Bitcoin, but much of that exposure comes from government seizures linked to illicit activity rather than intentional strategic investments. Fidelity believes this trend is about to change.

The report highlighted the successes of Bhutan and El Salvador, whose proactive Bitcoin strategies have provided substantial returns. In light of challenges such as rampant inflation, currency degradation and fiscal deficits, governments may increasingly see Bitcoin as a hedge against economic instability, with the potential costs of inaction outweighing those of adoption.

“We expect 2025 to be the year that changes for both acceptance and adoption.”

Calls for the United States to lead this change under a potentially Bitcoin-friendly administration have gained momentum. For example, Metaplanet CEO Simon Gerovich recently said that Japan and other Asian nations would surely follow suit if President-elect Donald Trump established a US Bitcoin reserve.

Both Trump and Senator Cynthia Lummis have expressed interest in establishing a Bitcoin reserve. Lummis, a longtime cryptocurrency advocate, introduced the Bitcoin Act of 2024, which aims to create a regulatory framework for the integration of Bitcoin into US Treasury strategy.

If those measures are enacted, Fidelity said it expects geopolitical and economic pressures to prompt other nations to follow suit, though likely under the radar to avoid market disruptions.

Obstacles ahead?

Despite these optimistic projections, the report touches on the uncertainty inherent in government action and policy formation. While rhetoric from incoming US officials suggests a favorable outlook for digital assets, competing legislative priorities could delay meaningful progress.

However, the recognition of Bitcoin and cryptocurrencies as crucial financial instruments is gaining momentum and has moved the industry from the margins to the forefront of economic discourse.

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