Israel Should Make Bitcoin a Strategic Reserve Asset

By embracing this digital currency, we can protect our economic future, enhance our financial independence, and ensure that we are not left behind

Former president Donald Trump is set to appear at the Bitcoin2024 conference in Nashville, Tennessee, on Saturday, where he will be touting himself as the “crypto president.”

Some have speculated 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, besting 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.

Empires throughout history, 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 Romans gradually reduced the silver content in their coins, leading to significant devaluation. The Byzantines debased their gold coin, the solidus, contributing to economic instability. Various Chinese dynasties faced hyperinflation due to excessive printing of paper money. 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 amassed an enormous national debt, which now stands at over $34trn as of June 2024. In comparison, the M2 money supply is at approximately $20.96trn.

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.

ASSETS that maintain their value over time are crucial for any nation seeking to protect its economic security and sovereignty. Gold has served this purpose for centuries, but its high transport costs and vulnerability to theft make it less suitable for the digital age.

Bitcoin, on the other hand, is uniquely suited to serve as a strategic reserve asset in the 21st century. It is scarce, portable, durable, divisible, recognizable and sanction-resistant, making it an ideal store of value and a powerful tool for maintaining economic independence.

Countries around the world 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 adopt the cryptocurrency, its value is expected to appreciate 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.

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,

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