Blindly mimicking the actions of major players in the market, especially when they announce intentions to buy, sell, or hold assets, is generally unwise. This is particularly true in the volatile realm of cryptocurrencies like Bitcoin (BTC 4.19%). However, there is one influential entity whose decisions should not be overlooked due to its significant influence.
On March 6, President Donald Trump signed an executive order to establish a Strategic Bitcoin Reserve, stating that “Government BTC deposited into the Strategic Bitcoin Reserve shall not be sold…”
While executive orders can be revoked by current or future presidents, I view this as a significant endorsement for Bitcoin. Here’s an explanation of how it bolsters the belief in investing in Bitcoin for the long haul.
The Bitcoin Narrative Gains Importance
The investment thesis for buying and holding Bitcoin permanently is fairly straightforward. The Bitcoin protocol limits the total supply to 21 million coins. As time progresses, mining Bitcoins becomes more difficult, and miners receive half the reward for the same amount of computational work due to halvings.
The increasing difficulty and periodic halvings ensure that the influx of new coins diminishes over time, making it more challenging for investors to acquire coins at previous price points. If demand continues to grow, this dynamic of shrinking supply can lead to higher prices.
A noteworthy aspect of this process is that even without new investors seeking Bitcoin, the price is expected to rise as current holders choose to buy more. Assuming these holders intend to keep their coins for the long term, their purchases effectively reduce market supply, supporting price increases.
Now, with the U.S. government, one of the wealthiest and most powerful entities globally, implementing the Strategic Bitcoin Reserve, it intends to stop selling Bitcoin acquired through asset forfeitures. By doing so, it aims for an indefinite holding period, which could significantly influence Bitcoin prices.
Prioritize Your Financial Security
Various states are also exploring the establishment of digital asset reserves akin to the federal government’s initiative, although there’s no certainty about the execution of these plans.
This uncertainty doesn’t imply that you should refrain from purchasing Bitcoin. Instead, ensure it doesn’t become your sole investment. It’s crucial to diversify your portfolio before committing funds to cryptocurrencies. More stable investments should take precedence over crypto, given its inherent volatility.
Lastly, it’s vital to remain committed to holding your Bitcoin, even during challenging periods. Investing significant amounts over time without the intention to ride out market fluctuations diminishes the potential for future value appreciation.
