Bitcoin for the Sovereign

At the start of Paradigm in 2018, we believed deeply that BTC—then ~$4K per coin—would grow many multiples in value over the coming years, in part fueled by rising legitimacy and institutional adoption. (More on the case for BTC).

But, at the time, adoption by sovereign nations still seemed improbable. Now, it seems underpriced.

Multiple sovereign nations now hold BTC, the most public of which is El Salvador.

Abu Dhabi’s sovereign wealth fund is engaged in Bitcoin mining.

US President-elect Donald Trump spoke about a Strategic Bitcoin Reserve on stage at Bitcoin Nashville.

US Senator Cynthia Lummis has proposed draft legislation for a Strategic Bitcoin Reserve.

Polymarket, the prediction market platform, estimates a ~30% likelihood of a Strategic Bitcoin Reserve.

So what? As Tyler Cowen likes to say, solve for the equilibrium. The game theoretic equilibrium of BTC adoption has shifted.

Sovereigns can no longer afford to dismiss BTC. From a game theoretic perspective, BTC is like gunpowder, not the iPhone. Christopher Nolan can afford not to adopt the iPhone; his intentional ludditeism may even lead to lower correlation and higher creativity. But once gunpowder was discovered, every sovereign was forced to adopt it… or else. The same is true today of AI, drones, and other key technologies.

Now that the Overton window has opened for US adoption of BTC, other sovereigns will not wait. Sovereigns that build BTC reserves early will benefit from significantly better entry prices.

The race to build BTC reserves is on.