Influence of US Politics on the Future of Bitcoin

Bitcoin needs to do x10 to match gold in terms of capitalization. Well, when U.S. President-elect Donald Trump talks about “something great” regarding Bitcoin - you can believe it. How real are such claims and what's behind this strategy?

The Path to Bitcoin Price x10

Price of Bitcoin is currently fluctuating around $107,000 and below and its market capitalization has reached $2.1 trillion. Gold, which is the traditional global reserve asset, has a capitalization of around $13-14 trillion. For Bitcoin to catch up with gold, its value would have to increase 6-7 times, not x10 times as previously.

Nevertheless, if Bitcoin does not just catch up with, but surpasses gold in its status as a global asset, then the price of Bitcoin may well aim for $1 million per coin. The unprecedented rise in Bitcoin price underscores the significant market confidence. Such a prediction is bolstered not just by past performance but also by unique factors like the cyclical impact of Bitcoin halving.

Why is this realistic?

1. Historical growth cycles & Bitcoin halving

• In 2017, BTC went from $1,000 to $20,000 (x20).

• In 2020-2021, the price of Bitcoin went from $10,000 to $69,000 (x7).

• In 2024, a new growth cycle has already led to the $107,000 mark, but the effects of Bitcoin halving and institutional investment lie ahead.

2. Comparison to gold

Bitcoin is already seen as digital gold due to its limited issuance of 21 million coins and ease of storage. Gold is mined annually and its supply is increasing, reducing the scarcity of the asset. In the case of Bitcoin, the supply is strictly limited.

If the Bitcoin price were to progress towards the speculated $1 million mark, this would have profound implicationsfor both retail and institutional investors. 

Why is the U.S. Betting on Bitcoin?

1. Rising inflation and U.S. government debt

The U.S. is facing economic challenges that are forcing the government to find new solutions:

• Inflation

In 2022, the U.S. inflation rate reached 9.1%, a record in the last 40 years.

• Public debt

Its amount has surpassed $34 trillion and the budget deficit continues to grow.

Fiat money is losing credibility as a means of saving, paving the way for alternatives like Bitcoin.

2. Trump crypto policy

Donald Trump, known for his economic pragmatism, has already labeled Bitcoin as a key element of the future US financial strategy. His statements go beyond populism:

• Supporting a Bitcoin Strategic Reserve Bill.

• Creating a favorable environment for crypto-business and mining in the US.

Trump crypto policy could stimulate not only national but international policies favoring Bitcoin’s broader adoption and integration into the global economic fabric.

3. Competing on the global stage

Countries such as China and the UAE are actively developing central bank digital currencies (CBDCs) and blockchain technology. The U.S. needs to maintain its leadership, and Bitcoin is emerging as an asset that can help maintain economic hegemony.

It’s worth mentioning that analysts usually include BTC in their crypto portfolio proposals as they see Bitcoin as a crucial and most stable crypto asset that influences the whole market. An example of such portfolio you can find here.

Bitcoin Strategic Reserve Bill

The idea of including Bitcoin in the US government reserves seems revolutionary at first glance, but it already has a strong basis, as seen by the proposition of a Bitcoin Strategic Reserve bill.

• Precedents from other countries

El Salvador was the first to recognize BTC as an official currency in 2021. Countries in Africa and Latin Americaare already considering BTC as a reserve asset.

• Political support

The Republican Party under Trump's leadership is increasingly pushing ideas for favorable regulation of the crypto market, countering the Democrats' hardline stance.

• Economic impact

The purchase of BTC by the government as a reserve would set a precedent for the rest of the world, leading to a strong increase in demand and the price of Bitcoin.

Bitcoin Growth Drivers

• Institutional investment

The approval of Bitcoin ETFs has opened access to the big players: pension funds, hedge funds and insurance companies. Bloomberg estimates that capital inflows through ETFs could exceed $50-100 billion in the coming years.

• Bitcoin halving 2024

April 2024 saw another Bitcoin halving, an event that cuts the block reward to miners in half. Historically, halving has led to a shortage of coins in the market and a rise in the price of Bitcoin.

• Limited supply

As of now, 19.7 million BTC have been mined, which is 93% of the total amount. With increasing demand, this makes Bitcoin one of the scarcest assets in the world.

• Global financial crisis

Increased geopolitical instability, sanctions and dedollarization are forcing countries to look for an alternative to the dollar. Bitcoin is becoming a “neutral” asset for the global economy.

BTC Growth Risks

• Regulatory pressure

The Democratic Party and regulators (SEC) may increase pressure on the crypto market, leading to short-term volatility.

• Technical constraints

Mass adoption of BTC requires scalable solutions. Technologies like Lightning Network are still in the development stage.

• Competition with CBDCs

Central banks are developing their own digital currencies that could compete with Bitcoin as a government asset.

Remember that you can get BTC or any other cryptocurrency for fiat or crypto on SimpleSwap.

Summary

The support for Bitcoin at the level of the U.S. president is not just words, but a strategic decision that could change the financial system. If the U.S. does start accumulating BTC in its reserves, it will set a powerful precedent for the rest of the world.

Donald Trump’s support for Bitcoin integration into US strategic reserves would indeed be revolutionary. Trump crypto policy, particularly advocating for legislative frameworks like the Bitcoin Strategic Reserve Bill, anticipates a future where Bitcoin is not only a mainstream investment asset but also a bedrock of national economic strategy. The Bitcoin Strategic Reserve Bill, if passed, would validate the cryptocurrency as a secured asset crucial to the financial integrity of the country.

Bitcoin price at $107,000 is just the beginning. Government support, institutional investment and global demand could take BTC to the $1,000,000 per coin mark as soon as the next decade.