Bitcoin: The Rise and Rise of the Cryptocurrency

Bitcoin has proven to be one of the best-performing assets in modern history. The value of the cryptocurrency has increased some 1,000 times

Bitcoin has seen a stellar rise in value over the past decade, emerging from a niche asset to one that is being taken increasingly seriously by governments, financial institutions and investors alike.

Once widely derided as a speculative asset with no intrinsic value, Bitcoin is now being referred to by the US Treasury Department as “digital gold”, thanks to its use as a store of value.

A number of countries have made big bets on the cryptocurrency. El Salvador, for instance, has accumulated some $600m worth of Bitcoin reserves and is one of just a handful of countries, along with the Central African Republic, that accepts the asset as legal tender.

Other countries, including the US and the United Kingdom, have acquired large holdings of Bitcoin through the seizure of assets implicated in criminal activity. The US has seized at least 215,000 Bitcoins, valued at almost $21bn at current prices, since 2020, according to an analysis by crypto firm 21.co.

Bitcoin’s stellar rise, however, has not convinced everyone. Many financial analysts continue to view it as a bubble with little to support its stunning rise.

“The more resources Americans misallocate to #Bitcoin and #crypto-related businesses, the fewer resources will be available to devote to making stuff we actually need,” Peter Schiff, chief economist at Euro Pacific Capital, said in a post on X last month.

“The end result will be larger trade deficits, a weaker dollar, higher inflation, and a lower standard of living.”

Even as Trump’s positive stance towards Bitcoin has thrilled crypto enthusiasts, some pro-crypto governments have reined in their support of the sector.

El Salvador announced this week that it would privatize or close its cryptocurrency wallet “Chivo” as part of the terms of a $1.4bn loan deal with the International Monetary Fund (IMF).

Bukele’s government also agreed to make acceptance of Bitcoin by businesses voluntary, within steps to assuage the IMF’s concerns about Bitcoin-related risks.

Some crypto supporters see governments and central banks taking a leading role in the global march towards digitised money with the development of their own currencies.

Celente of the Trends Research Institute said the US, for example, could create its own digital currency as a way to pay off its federal debt.

“There’s no way the US can pay off their $36 trillion worth of government debt. They may come up with a new cryptocurrency as part of CBDCs (Central Bank Digital Currency),” Celente said.

“You’re seeing more and more of the central banks talking about CBDCs, they’re definitely going to go into that direction,” Celente added.

“They’re going to use this as an excuse to come up with a coin because they cannot pay off the debt that they have now. They’re going to say, ‘This [digital currency] is worth a lot more than the dollar, yuan, the euro,’ and use that to pay off their debt.”

Some observers have warned that the introduction of CBDCs would open a Pandora’s box of problems related to government control and surveillance of people’s finances.

Trump’s pick for commerce secretary, Howard Lutnick, is the CEO of Cantor Fitzgerald, which manages the stockpile of US Treasuries that back Tether, the largest stablecoin by market cap.

Stablecoins are cryptocurrencies that are pegged to a traditional commodity or currency to maintain a stable price. They have reached record volumes of more than $200bn in total market cap.

Sobrado said there could be an opening for Tether to become the national de facto privatised CBDC for the US, and for smaller economies such as the UAE, Hong Kong, Singapore and Switzerland to issue their own CBDCs.

“The pro-crypto voices and Fed-critical voices have never been louder in the White House,” Sobrado said.

Celente said he had no doubt that the future of money is digital.

“There’s no question at all,” he affirmed.