Chief Investment Strategist, The Freeport Society
One seven-letter word has captured the world’s attention…
Bitcoin.
The granddaddy of crypto’s price has absolutely exploded higher since the election, up by about 47% as I write this.
A lot of that movement was based on the belief that major changes were coming that would pull Bitcoin deeper into the financial mainstream. Whether or not that comes to pass remains to be seen.
The bigger question right now is this:
What’s next for Bitcoin?
Especially now that the incoming Trump administration will be staffed with crypto enthusiasts…
Well, let’s talk about that today.
And discuss how the answer could affect your wealth and investment strategy.
Bitcoin started out as libertarian fever dream… a currency untethered from Federal Reserve tinkering and outside of the realm of government control.
It eventually went corporate, as Wall Street got in on the action and launched ETFs, futures, options, and a host of other products.
Now it’s going institutional.
It’s already legal tender in El Salvador.
And Trump plans to make America the “crypto capital of the planet.” He’s even floated the idea of creating a strategic Bitcoin reserve.
Understand that some of this is just marketing spin.
But some of President-Elect Trump’s proposals for Bitcoin are easy enough to implement. They don’t require Congress or the Treasury to make any major moves.
For example, the government can simply stop auctioning off the Bitcoin it seizes from criminals and simply keep it on Uncle Sam’s balance sheet.
For example, it recently acquired 69,000 Bitcoin after seizing it from a former IRS agent who’s been languishing in a Nigerian jail cell since 2020 (It took four years for the U.S. to establish legal ownership of that massive sum). That would add a quick $4.4 billion to a U.S. Bitcoin reserve.
The U.S. government currently owns an estimated 207,000 Bitcoin. At today’s prices, that’s worth around $20 billion.
That’s a drop in the bucket compared to the $600 billion in gold bullion that The Treasury owns, of course.
Although, it’s worth noting that the world’s largest Bitcoin ETF, the iShares Bitcoin Trust (IBIT), only has about $50 billion in it.
Fortunately, there could be a lot more coming.
Look Out Head… Bitcoin’s Surge Is Just Beginning
Over the summer, Wyoming Senator Cynthia Lummis introduced the “Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide Act of 2024”, or BITCOIN Act.
If passed under the more crypto-friendly incoming Congress, it would require that all Bitcoin that any Federal agency holds be transferred to the Treasury to be held in a strategic bitcoin reserve.
Great.
Trump was likely to do that anyway.
But here’s where it gets interesting.
It would also require the Treasury Secretary to buy “not more than 200,000 Bitcoins per year over a 5-year period, for a total acquisition of 1 million Bitcoins.”
The Treasury must then hold those Bitcoins for at least 20 years.
A million Bitcoins would be just under 5% of the maximum 21 million Bitcoins that will ever be mined.
And given that an estimated 20% of all Bitcoins have been lost due to busted hard drives or lost passwords, it’s actually about 6%.
What do you think will happen if Uncle Sam starts throwing that kind of money around in a market that still has relatively low liquidity?
Yup.We’re likely looking at hundreds of percent of more upside in Bitcoin.
Subscribers to my Freeport Investor service who followed my advice a year ago are sitting on open gains of 142% in Bitcoin. I recommended it as one of our dollar hedge investments.
When IBIT launched in March, I added that to our Freeport Investor model portfolio as well. Subscribers who followed suit are up around 56% in that investment.
And we’ll be holding onto these positions for a long while yet. Not only because of the potential for Bitcoin to rocket even higher still… but also because inflation continues to eat away at our dollar. You can learn more about that and our investment strategy here.
But a Warning
Now, once the U.S. government gets in on the action, it’s entirely possible the jig is up.
If Uncle Sam started dumping billions of dollars into Bitcoin, that might be our Freeport Investor moment to take profits on at least part of our position. We’ll cross that bridge when we get to it.
But what would the world look like if this evolved into an actual monetary system like the classic gold standard?
What if we had a legitimate Bitcoin standard underpinning the world financial system?
Well…
We’d have a more honest system.
The Fed wouldn’t be able to print unlimited dollars if they were redeemable in Bitcoin. That would curtail the government’s ability to borrow insane amounts of money.
Inflation would disappear. In fact, we’d likely have deflation, or falling prices.
Money would be tighter. But that would encourage thrift and a more sensible approach to spending… which is what we advocate here at The Freeport Society.
Unfortunately, this is why a true Bitcoin standard will likely never happen. Uncle Sam would never willingly give away his right to print money. Or at least not any time soon..
What could well happen though is that Bitcoin becomes a reserve asset alongside gold.
The result is that this crypto will still shoot higher as investors look to buy in front of Uncle Sam.
So, whichever way you look at it, Bitcoin belongs in your portfolio.
To life, liberty, and the pursuit of wealth.