At the inception of Paradigm in 2018, we strongly believed that the value of BTC (then around $4000 each) would multiply several times in the coming years, partly due to increased legitimacy and institutional adoption (for more reasons to be optimistic about BTC, please see the previous article "Preaching Bitcoin to Enlightened Skeptics").
But at that time, the likelihood of sovereign states adopting BTC was still quite low. Now it seems that this likelihood has been underestimated.
Currently, multiple sovereign states hold BTC, the most well-known of which is El Salvador.
The Abu Dhabi sovereign wealth fund is involved in Bitcoin mining.
U.S. President-elect Donald Trump spoke about strategic Bitcoin reserves on the Nashville Bitcoin stage.
U.S. Senator Cynthia Lummis has proposed a legislative draft for strategic Bitcoin reserves.
The prediction market platform Polymarket estimates that the likelihood of Trump establishing a strategic Bitcoin reserve is about 30%.
So what? As Tyler Cowen likes to say, solve for the equilibrium. The game-theoretic equilibrium for BTC adoption has already changed.
Sovereign states can no longer ignore BTC. From a game-theoretic perspective, BTC is like gunpowder, not an iPhone. Christopher Nolan can choose not to adopt an iPhone; his deliberate Luddism may even enhance creativity (Note: The famous director Nolan has stated that he has never used a smartphone, does not use email, and even writes his scripts on computers that are not connected to the internet). But once gunpowder is discovered, every sovereign state is forced to adopt it... otherwise the consequences are dire. The same goes for AI, drones, and other critical technologies today.
Now that the Overton window for the U.S. to adopt BTC has opened, other sovereign states will not wait. Sovereign states that establish BTC reserves early will benefit from significantly more favorable entry prices.
The race for sovereign states to establish BTC reserves has already begun.
