Has the race started? This is a question some people have been asking since El Salvador adopted Bitcoin (BTC) as legal tender in September of the past year. As the Swiss city of Lugano did essentially the same thing in early March, it is undoubtedly only a matter of time before other countries rush to adopt Bitcoin.
That’s roughly the conclusion reached in a recent report by Fidelity Investments, whose analysts Chris Kuiper and jack neureuter wrote that countries, even those that do not “believe” not really bitcoin, would “obligated” to acquire sooner or later. As Kuiper and Neureuter claim, this would happen because refusing to do so (when others create BTC stocks) could cost them dearly.
And industry figures who have given interviews to Cryptonews.com largely agree with this analysis, with most arguing that some kind of game theory does exist. And while they also suggest that a race to acquire Bitcoin by nation states should drive the price of the cryptocurrency massively higher, they caution that divisibility of BTC will not make it too expensive for investors and traders. retail users.
Game Theory = Global Bitcoin Adoption?
Fidelity analysts also cited game theory in their report, noting that history has repeatedly demonstrated that capital always flows where it is most welcomed. Basically, any country that encourages innovation (i.e. the acquisition or adoption of Bitcoin) will have an advantage over its counterparts, who will be forced to follow their example for fear of being left behind.
As they wrote, “We also believe there is a very high-stakes game theory working here that if cryptocurrency adoption increases, countries that receive Bitcoin today will be better off. competitive than their peers. Therefore, even if other countries do not believe in the investment thesis or the adoption of Bitcoin, they will be forced to acquire it as a kind of insurance. ”
Kuiper and Neureuter also argued that countries could pay low costs today, primarily as a hedge against potentially much higher costs in the future.
“So we would not be surprised to see other sovereign nation states acquiring Bitcoin in 2022 and perhaps even seeing a central bank make such an acquisition”they concluded.
Officials in Lugano may have read this finding, as city officials signed an agreement in early March with stablecoin issuer Tether to encourage businesses to accept Bitcoin (and USDT). Speaking of the agreement, the words of the Mayor of Lugano, Michele Folettilargely echoed those of Fidelity analysts.
” Lugano invests in its future […] We strongly believe in this technology, in the scaling potential of technology […] that will build a better city: more open, transparent and smart,” he said at the time.
And if you ask almost any analyst or public figure working in the crypto sector, they will say that there is a very high probability that other jurisdictions will also turn to Bitcoin and cryptocurrencies in one way or another. other.
“Countries that adopt Bitcoin first will benefit their citizens,” announced Alex GladsteinChief Strategy Officer of the Human Rights Foundation.
Samson Mow also agrees with Fidelity analysts, and the game developer’s CEO Pixelmatic also refers to game theory in its explanation. (In March of this year, Mow left Bitcoin-focused Blockstream, where he served as chief strategy officer, to focus on “ bitcoin adoption in nation states”.)
“Bitcoin game theory will force nation states to compete for the acquisition of cryptocurrency, and it will likely be in the form of the mining. The second-order advantage will be that bitcoin will cause more and more nation states to seek energy independence to ensure that their bitcoin mining operations are not disrupted by external factors”he told Cryptonews.com.
Indeed, the crypto industry has no shortage of people who believe that central banks and/or nation states will, to some extent, have to acquire Bitcoin. For Nigel GreenCEO and founder of the financial advisory firm ofVere Groupit’s ‘almost inevitable’with an increasing number of people doing it at ” short term “.
“Central banks, especially in countries with weaker national currencies, will observe in real time the benefits of owning digital world currencies in our increasingly technological and globalized world. We can expect them to run advanced modeling of what would happen to their economies if they fail to move quickly,” he told Cryptonews.com.
Green also suggests that recent geopolitical issues, including the Russian invasion of Ukraine, reinforce the relevance of this decision, especially with the fact that Bitcoin and cryptocurrency in general are increasingly recognized globally. world.
However, looking at the adoption process at the national level, some analysts say that the most developed countries will not be in the lead.
“As we saw in the case of El Salvador, countries that have the least to lose in terms of monetary sovereignty are more open to bitcoin adoption. I believe we will see the ‘next El Salvador’ in Latin America or Africa,” said Josef Tetekbrand ambassador Trezor.
According to Tětek, the second country to take serious steps towards Bitcoin adoption could be even more important than the first, as it will confirm the emerging trend and could add momentum to the resulting race.
Are nation states capable of contributing to Bitcoin’s surge?
Exactly when this will happen remains to be seen, although the macroeconomic (and political) instability of the current period may accelerate the overall process, as some commentators suggest.
And when that happens, commentators are generally unanimous in thinking that the price of Bitcoin will skyrocket.
“If a number of countries start competing for bitcoin holdings, we will see a massive increase in the price of bitcoin. Bitcoin in the US$30,000-40,000 range is incredibly undervalued,” Samson Mow pointed out.
No analyst is quite ready to give an exact number, but most say that the growth will be considerable considering that the supply of Bitcoin is limited.
“It is likely that the price of Bitcoin will rise significantly, primarily because such purchases would greatly increase Bitcoin’s legitimacy in the eyes of ordinary people. today, to a serious monetary asset that everyone should consider”said Josef Tětek.
But what may also seem exciting to current Bitcoin holders is that such adoption will increase the possibility that the massive growth of Bitcoin will make the cryptocurrency extremely expensive for people to acquire. “ordinary”. Assuming it is adopted by nation states and becomes a legal means of payment, its acquisition will become necessary.
However, experts point out that Bitcoin is highly divisible, meaning it can accommodate huge price increases while still being usable for small transfers.
“As bitcoins are divisible into 100,000,000 ‘satoshis’, even when the cryptocurrency reaches $1 million, satoshis will only cost around $0.01. So people can buy 1,000 satoshis for just $100 “, has explained Lou KernerCEO of the investment company Blockchain Coinvestors.
Of course, it’s likely that we still have a long way to go before Bitcoin hits a price of $1 million, if that ever happens. Either way, the journey won’t be easy.
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