At the inception of Paradigm in 2018, we firmly believed that the value of BTC (then around $4,000 per coin) would grow several-fold in the coming years, partly due to increased legitimacy and institutional adoption (for more reasons why we are bullish on BTC, please refer to the previous article "Preaching Bitcoin to the Enlightened Skeptics").
However, at the time, the possibility of sovereign nations adopting BTC was still quite low. In retrospect, this possibility was underestimated.
Currently, multiple sovereign nations hold BTC, the most notable being El Salvador.
The Abu Dhabi sovereign wealth fund is involved in Bitcoin mining.
Former US President Donald Trump mentioned strategic Bitcoin reserves on the stage in Nashville.
US Senator Cynthia Lummis has introduced a bill proposing a strategic Bitcoin reserve.
The prediction market platform Polymarket estimates the likelihood of Trump establishing a strategic Bitcoin reserve at around 30%.
So what? As Tyler Cowen likes to say, we must "solve for the equilibrium". The game-theoretic equilibrium of BTC adoption has shifted.
Sovereign nations can no longer ignore BTC. From a game-theoretic perspective, BTC is more like gunpowder than the iPhone. Christopher Nolan can choose not to use the iPhone, and his deliberate Luddism may even enhance his creativity (note: the famous director Nolan has stated that he never uses a smartphone and does not even use email, and the computers he uses to write scripts are not connected to the internet). But once gunpowder is discovered, every sovereign nation is forced to adopt it... or face dire consequences. The same now applies to AI, drones, and other critical technologies.
Now that the Overton window for US adoption of BTC has opened, other sovereign nations will not wait. Sovereign nations that establish BTC reserves early will benefit from a clearly more favorable entry price.
The race for sovereign nations to establish BTC reserves has begun.
