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Digital Assets, Bitcoin, and Strategic Reserves
1. Digital Asset Taxonomy:
- Need for Clarity: The "Digital Assets Framework" emphasizes the importance of a well-defined taxonomy for digital assets to facilitate policy development and innovation.
- Asset Classifications: The framework proposes several categories:
- Digital Commodity: Assets like Bitcoin without an issuer, backed by digital power.
- "Digital Commodity – An asset without an issuer, backed by digital power (e.g., Bitcoin)."
- Digital Security: Assets with an issuer, backed by traditional securities (equity, debt, derivatives).
- "Digital Security – An asset with an issuer, backed by a security (e.g., equity, debt, derivatives)."
- Digital Currency: Assets with an issuer, backed by fiat currency.
- "Digital Currency – An asset with an issuer, backed by fiat currency."
- Digital Token: Fungible assets with an issuer, providing digital utility.
- Digital NFT: Non-fungible assets with an issuer, offering digital utility.
2. Federal Reserve Policy and Market Anomalies:
- Hawkish Cut: Jerome Powell's actions, specifically the "hawkish cut," are described as potentially problematic. The market is reacting anomalously compared to historical behavior after rate cuts.
- Market Calling the Fed's Bluff: The 10-year treasury yield is acting unpredictably. Since the Fed started cutting rates, the 10-year yield has moved in the opposite direction.
3. Bitcoin Volatility and Value:
- Volatility is a Feature: Bitcoin's inherent volatility is acknowledged, with price swings being sharp and rapid. This is not ideal for short-term cash needs.
- Long-Term Store of Value: Despite volatility, Bitcoin is increasingly considered a superior store of value compared to assets like silver, with its market cap significantly exceeding silver's.
- Bitcoin as a Rising Asset: Bitcoin continues to grow and accumulate value from the legacy money supplies of the world.
4. Bitcoin Strategic Reserve:
- Trump Administration's Intent: The Trump administration is reportedly "very adamant" about establishing a Bitcoin strategic reserve, potentially within the first 100 days of a new term.
- Acquisition Concerns: There is concern that the US government's move to acquire Bitcoin could cause market instability and impact faith in the treasury market if they move "too hard too fast".
- Debt Reduction: Bitcoin holdings could be a solution to the national debt problem for the US and appeasing those who want the US dollar to remain strong, if backed by Bitcoin.
- Gold Revaluation: There's a discussion of revaluing gold reserves at market rates, which are significantly higher than the current book value of $42/ounce, and using the delta to buy Bitcoin.
5. Global Monetary Dynamics:
- BRICS Challenge: The BRICS nations are highlighted as a potential threat to the dollar's hegemony by acquiring gold and potentially launching a gold-backed currency. This is seen as a potential motivation for the US to pursue Bitcoin.
"and has explicitly said particularly this year that um he would like and believes that there needs to be a brenon Woods 2.0 a monetary reset"
6. Bitcoin Price Predictions and Market Cycles:
- Supercycle: There's a contrarian argument that Bitcoin may not follow its typical 4 year cycle and instead enter a supercycle due to different factors.
- Price Targets: Based on a power curve analysis, Bitcoin could potentially reach $800,000 by December 2025.
"... in December 2025 that would take you to $800,000 per Bitcoin..."
- A 4x multiple over the trend would put Bitcoin at $270,000 by the end of next year and a 6.4x multiple would reach $800,000.
- Market Cap Projections: Bitcoin has already surpassed the market cap of silver and the British Pound and is now the 5th largest fiat currency and is approaching the size of gold held by central banks, and eventually all the gold in the world.
- Lindy Effect: Bitcoin appears to be experiencing the Lindy effect, gaining credibility with each year of its existence and adoption.
