In a new opinion piece, published in The Jerusalem Post, Joel Zamel, Wikistrat's founder and expert on Bitcoin geopolitics, shares why it's time for countries around the world to embrace Bitcoin
On Saturday, former president Donald Trump will speak at the Bitcoin2024 conference in Nashville, Tennessee, positioning himself as the “crypto president.”
Some speculate that he is considering making Bitcoin a strategic reserve asset of the US government. Israel should be doing exactly that.
Bitcoin is revolutionizing the concept of money, surpassing gold in all five properties of money: divisibility, scarcity, durability, portability, and recognizability.
This digital asset offers an unprecedented solution to the age-old issue of currency debasement.
Historically, empires from ancient Rome to the Byzantine Empire, and from the Chinese dynasties to the Ottoman Empire, and even the Weimar Republic, have devalued their currencies through excessive inflation.
The Ottoman Empire frequently reduced the precious metal content of its coins to address fiscal deficits.
The Weimar Republic in post-World War I Germany printed vast amounts of paper money, leading to hyperinflation and economic turmoil.
The US is no different. The country has accumulated an enormous national debt, exceeding $34 trillion as of June 2024. In comparison, the M2 money supply stands at approximately $20.96 trillion.
This disparity highlights that even if all the money held by both domestic and foreign holders of US currency were pooled together, it would still be insufficient to pay off the national debt.
FIAT CURRENCIES – which only have governmentally declared (legal tender) value but no intrinsic value – all derived their value, directly or indirectly, from a promise for gold.
The US dollar, British pound, French franc, German mark, Japanese yen, and the many USD dollar-pegged currencies of today were originally backed by this same promise.
However, most governments abandoned the gold standard in the 20th century. The United States officially went off the gold standard in 1971 under president Richard Nixon. Most countries still hedge against currency debasement by holding physical gold reserves.
Of course, in our infinite strategic wisdom, Israel holds a total of zero ounces in gold reserves, holding only slowly melting fiat promises of other nations.
It is therefore our obligation to not get it wrong again in the first monetary revolution in 4,000 years.
The US expands its money supply by an average of 7%-8% annually, with a staggering 24% increase during the COVID-19 pandemic.
This inflation effectively erodes the purchasing power of its savers and foreign creditors, financing greater government expenditure by monetizing the debt.
The situation is even more dire in other countries, where currency inflation can exceed 20% per year, as seen recently in Lebanon and Turkey. Lebanon experienced an average annual inflation rate of more than 222% in 2023, while Turkey’s inflation rate reached 53.86% in the same year.
Dollars can be sent around the world at minimal cost but lose value over time due to inevitable inflation.
Gold, while maintaining value over time due to its scarcity, is costly to transport.
Bitcoin uniquely preserves value both over time and space, offering a dual advantage that neither gold nor fiat currency can match.
Nation-state adoption is inevitable
Bitcoin has been the best-performing asset in history and is still in its early stages of adoption.
This year, the SEC approved spot Bitcoin exchange-traded funds (ETFs), which have since become the fastest-growing ETFs in history, with major Wall Street players like BlackRock, Fidelity, VanEck, and WisdomTree investing.
Bitcoin is rapidly becoming a mainstream, accepted asset class, with support from influential billionaire entrepreneurs and investors such as Stan Druckenmiller, Paul Tudor Jones, Elon Musk, Michael Saylor, the Winklevoss twins, and Bill Miller.
Countries are beginning to recognize Bitcoin’s potential as a future monetary standard, akin to holding gold.
El Salvador has made Bitcoin legal tender, and as more countries accumulate Bitcoin, its value is expected to surge even further.
The strategic implications of countries like Iran accumulating Bitcoin in response to sanctions cannot be understated.
By investing in this scarce digital asset, Iran and similar nations can build a sanction-resistant financial foundation that will appreciate immensely in the coming decades.
This poses a significant risk as it could enhance their financial resilience and geopolitical leverage.
Wealthy Gulf states are already quietly accumulating the digital asset and investing in Bitcoin mining operations.
Strategic implications
For Israel, being ahead of the curve in adopting Bitcoin is not just an economic opportunity but a strategic necessity.
The events of October 7 have re-emphasized the critical importance of self-sufficiency and the need to avoid dependency on external entities for national security.
Bitcoin, as the scarcest bearer asset, offers a level of security and independence unmatched by treasury bonds, foreign currency reserves, or fiat-denominated equities.
Its sanction-resistant nature is crucial for maintaining the sovereignty that Israel prides itself on.
By investing in Bitcoin, we ensure our economic stability and fortify our national security against external pressures.
Israel’s current treasury reserves, primarily held in bonds and fiat currency, are vulnerable to the inevitable debasement that occurs as central banks inflate their money supplies.
This inflation dilutes the value of these reserves and erodes purchasing power, essentially serving the interests of those who can print money at will.
This delusion is rooted in Keynesian economics, which prioritizes short-term economic stimuli over long-term financial stability, disproportionately benefiting those with the power to create currency.
By shifting a portion of our reserves into Bitcoin, we protect our national wealth from this ongoing erosion and align our economic strategy with a more sustainable and independent monetary policy.
For Israel, accumulating Bitcoin as a strategic reserve asset, even for a small portion of our sovereign reserves, could be a game-changer.
Such a move would demonstrate true leadership, positioning Israel at the forefront of monetary innovation and securing our future prosperity, resilience, and independence, especially during times of conflict.
Bitcoin represents a transformative opportunity for Israel.
By embracing this digital currency, we can protect our economic future, enhance our financial independence, and ensure that we are not left behind in the global shift towards a new standard of money.
It is time for Israel to wake up, get off zero, and lead the way in this financial revolution.
The article was originally published in The Jerusalem Post.
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