The entry of governments into the cryptocurrency market marks a turning point in the history of digital assets. Technically, the approach of nation-states can be divided into two main categories: strategic acquisition and passive accumulation through seizure.
1. Strategic Acquisition:
Led by countries like El Salvador and Bhutan, this approach represents a direct investment thesis.
Motivation: Pursuit of monetary sovereignty, reduction of dependence on the US dollar, attraction of investments in technology, and an attempt to hedge against inflation. El Salvador, by making Bitcoin legal tender and making periodic purchases, executes a dollar-cost averaging strategy at the national level.
Execution: Purchases are generally announced publicly to signal confidence to the market. In the case of Bhutan, the strategy is even more sophisticated, using its hydropower surplus for Bitcoin mining, turning a natural resource into a digital asset for its reserves.
Market Implications: Although the quantities purchased are small compared to global volume, the symbolic impact is immense. It validates Bitcoin as a potential store of value asset and can create a psychological floor on the price, with the market aware that a sovereign is accumulating.
2. Passive Accumulation:
Nations like the United States, China, United Kingdom, and Germany hold massive amounts of Bitcoin, but the origin is predominantly passive, coming from the seizure of assets from illicit activities.
Motivation: It is not an investment strategy but a consequence of law enforcement. The challenge for these governments is the management of these assets.
Execution: The management of these crypto assets varies. The US, for example, historically liquidates its positions through auctions. These sales are significant technical events, as the release of large volumes of Bitcoin can create short-term selling pressure
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