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Weeks after Donald Trump was reelected to the White House, the price of bitcoin reached $100,000 for the first time, reflecting investor confidence in the upcoming administration’s crypto-friendly policies.
With Trump’s inauguration now just weeks away, crypto experts believe the digital currency is on track to become a backbone of the global financial system.
While crypto’s immediate future depends on whether Trump follows through on campaign promises to deregulate trading of alternative currencies and order Washington to buy bitcoin as a strategic reserve asset, financial firms are already preparing to expand their crypto footprint next year.
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Crypto’s rising market cap sees it rival traditional assets
The soaring price of bitcoin means it is increasingly rivaling traditional assets such as gold or stocks, according to CCN, a crypto news site. Crypto’s collective market value reached $3.35 trillion in December — making it more valuable than the market capitalization of tech giants Amazon and Microsoft. As world governments scramble to tackle inflation and resolve militarized conflicts, bitcoin’s decentralization and scarcity will keep it an “attractive asset in uncertain economic times,” much like gold, CCN wrote. But more corporations, hedge funds, and governments need to begin holding bitcoin as a reserve asset in order to drive demand, the site argued.
US states eye creating bitcoin reserves
President-elect Donald Trump has pledged to create a federal bitcoin reserve, allowing Washington to hold the cryptocurrency as a strategic asset. But some insiders like Ki Young Ju — CEO of the analytics site CryptoQuant — believe the US dollar is so powerful that Washington will only buy bitcoin if its “global economic dominance [is] genuinely threatened.” However, states such as Texas and Ohio are currently mulling legislation to create their own reserves by allowing residents to pay taxes and fees using bitcoin. That might present its own challenges, however, since “the crypto market is not very friendly to tax authorities,” one blockchain expert told CNBC.
Tokenization set to rise in 2025
Tokenization — digital representations of real-world assets, like property, stocks or art, of which NFTs are an example — has failed to take off in the crypto world, in large part because of an “unfavorable US regulatory regime,” Bloomberg wrote: Just 0.003% of the total value of global assets have been tokenized, according to one data tracker. But tokenized financial assets are likely to get a boost under Trump’s crypto-friendly policies, with multinational firm BlackRock already launching a tokenized money market, for example. Visa Inc. is rolling out a scheme for banks to issue tokens, while Mastercard and JPMorgan Chase have partnered to use tokens for some cross-border transactions. “That’s a clear trend that will continue to evolve and unlock a lot of new business models,” said one Mastercard executive.