U.S. Treasury Refers To BTC As ‘Digital Gold’; Foresees Rapid Growth For Digital Assets
U.S. Treasury Department Fiscal Year 2024 Fourth Quarter Reporthighlighted Bitcoin’s rapid growth, especially in the DeFi space, when discussing its use cases. Notably, it also acknowledges that Bitcoin is digital gold.
It noted trends in digital asset growth and usage, experiencing rapid growth from very low levels. It noted that growth is coming from both native cryptocurrencies such as Bitcoin and Ethereum, as well as stablecoins.
Store of value in the Defi world
According to the U.S. Department of Commerce, the primary use of BTC (also known as “digital gold”) appears to be as a store of value in the DeFi world. It highlighted that speculative interest appears to have played a significant role in the growth of digital tokens so far.
Recently, Federal Reserve Chairman Jerome Powell also compared Bitcoin to gold when comparing the two assets. Jerome Powell said Bitcoin is a speculative asset and is more closely correlated to gold than the U.S. dollar.
The report also noted Bitcoin’s market capitalization over the years. In 2015, the flagship cryptocurrency had a market capitalization of $6.4 million. In 2019, this number grew to $194 billion. Currently, Bitcoin’s market capitalization is $2.3 trillion. Bitcoin prices recently crossed the $100,000 mark and show no signs of stopping anytime soon. Analysts note that Bitcoin’s success is driving institutional “FOMO” as more companies look to keep it as an asset on their balance sheets.
Stablecoin growth
The U.S. Treasury report also highlighted stablecoins as another rapidly growing category of digital assets. The report noted that the growth of stablecoins has led to a slight increase in demand for short-term Treasury bonds.
A large portion of the collateral for fiat-backed stablecoins is said to be in the form of Treasury bills and Treasury-backed repo transactions. The U.S. Treasury Department estimates that $120 billion of stablecoin collateral is directly invested in Treasury bonds.
It also noted that stablecoins play an integral role in intermediating transactions in digital asset markets. Over 80% of cryptocurrency transactions now use stablecoins as one aspect of the transaction. In the short term, the U.S. Department of Commerce expects the stablecoin market, as well as the overall size of the digital asset market, to continue to grow.
“High beta assets”
The report also mentioned that institutional sponsorship of Bitcoin has been growing in recent years, with the crypto asset performing like a “high beta” asset, citing BlackRock ETF and MicroStrategy as examples. In addition, they predict that the rapid growth and large volatility of Bitcoin and other digital assets may lead to future hedging needs and the need for guarantees on Treasury securities.
