Chief Investment Strategist, The Freeport Society
And I mean a lot higher.
I believe it will top $1 million before the end of Trump’s next term.
It’s all to do with a plan inside the new Trump administration to make U.S. Bitcoin a strategic reserve asset – like gold – and buy about 5% of all the bitcoins in circulation.
Not only is this going to send the price of Bitcoin skyrocketing. It will mark the beginning of a new phase of legitimacy and mainstream acceptance of this once fringe asset.
And as I’ll show you today, this isn’t rumor or wishful thinking. It’s already in motion.
Crypto Capital of the Planet
In July, at the Bitcoin 2024 conference in Nashville, Tennessee, Trump said he’d create a “strategic national bitcoin reserve.”
It’s part of his administration’s plan to position the U.S. as the “crypto capital of the planet.”
That same month, Republican senator from Wyoming Cynthia Lummis introduced a bill to Congress to do just that.
Her Boosting Innovation, Technology, and Competitiveness Through Optimized Investment Nationwide (BITCOIN) Act is currently sitting in committee.
If Trump signs it into law, it calls for the U.S. Treasury to buy up to 1 million bitcoins over a five-year period, with the aim of bolstering the U.S. dollar and ensuring the nation’s leadership in financial innovation.
Roughly 19.5 million bitcoins have been mined so far. When you account for the coins folks are holding in long-term storage, plus the bitcoins that have been lost, that leaves about 15 million in circulation.
And for all of Bitcoin’s recent popularity, it’s really not all that liquid. There’s only about half a million Bitcoin transactions on any given day.
If the BITCOIN Act becomes law, we’re talking about the U.S. government buying about 200,000 bitcoins a year – or 1.33% of supply.
That may not sound like a lot. But the price of Bitcoin doesn’t move linearly with increases in demand. This is a speculative market. When folks see a big buyer like that stepping in, they’re likely to buy more coins themselves in anticipation of further price increases.
So, a good rule of thumb is to factor in a 5%-10% price move for every 1% increase in net demand.
Factoring in that force multiplier, that buying alone would increase the price of bitcoin by about 13.3% a year (1.33% x 10) for a compounded increase of about 85% over five years.
If we assume a starting price of $100,000 for Bitcoin, that would mean a price of $186,000 at the end of that period.
But that’s a highly conservative estimate.
Because it doesn’t stop there. That’s just the beginning. In fact, that’s likely just the beginning.
“The Only Instrument for International Trade”
Last Monday, news broke that Russia has proposed creating its own Bitcoin reserve.
As State Duma deputy (Russia’s equivalent of a member of congress) Anton Tkachev put it…
In conditions of limited access to traditional international payment systems for countries under sanctions, cryptocurrencies are becoming virtually the only instrument for international trade. The Central Bank of Russia is already preparing to launch an experiment in cross-border settlements in cryptocurrency.
And Russian President Vladimir Putin appears to agree… with good reason.
In response to Russia’s invasion of Ukraine, in February 2022, the U.S. and its allies froze about $300 billion in the foreign currency reserves Russia’s central bank was holding in accounts in Europe.
They did this by locking Russia out of the SWIFT international payments system that banks use to make payments to each other.
And last month, Reuters reported Putin asking out loud, “Why accumulate reserves if they can be lost so easily?”
As he continued..
For example, bitcoin, who can prohibit it? No one. Because they are new technologies. And no matter what happens to the dollar, these tools will develop one way or the other because everyone will strive to reduce costs and increase reliability.
There’s lots I disagree with Putin about – including his bloody invasion of Ukraine. But he’s not wrong here.
And if the U.S. and Russia start a Bitcoin arms race, what other governments will get in on the action before the price goes stratospheric.
In case you think this is a big leap, many governments – including the U.S. – already own Bitcoin.
New Bitcoin Standard?
According to Bitbo’s Bitcoin Treasuries website, the U.S. owns 207,189 bitcoins. And China owns 194,000.
At today’s price, that’s worth about $20 billion for each country.
In most cases, these are bitcoins governments have acquired through seizures tied to criminal activity.
But in the case of El Salvador, the government there has been buying bitcoin as a hedge against fiat currency inflation and to reduce its reliance on the U.S. dollar.
Bitcoin is also legal tender, meaning El Salvadorans must accept it as payment.
I’m not saying the world economy will be shifting to a new Bitcoin Standard, similar to the Gold Standard we were on in the late 19th and early 20th centuries.
Not yet, at least…
I don’t see the Fed and other central banks giving up their ability to print money at will any time soon.
But if the U.S. and other governments make Bitcoin a strategic reserve, they’ll open the floodgates to more buying. It would give Bitcoin full institutional respectability and melt away any lingering resistance to it.
Suddenly, Bitcoin at $500,000 or $1 million doesn’t sound crazy. It may end up being too conservative.
Our Bitcoin position in our flagship Freeport Investor is up about 130% since I recommended it to paid-up subscribers last December. And I have no plans to recommend a sale any time soon. And in fact, in the December edition of Freeport Investor, I added a new Bitcoin-type position to our model portfolio. Sign up here to get those details.
And if you don’t already own some Bitcoin as part of a diversified portfolio, now is a great time to start buying.
Soon, you could be facing stiff competition from the world’s deepest pocketed governments.
To life, liberty and the pursuit of wealth.