US Treasury Recognizes Bitcoin as “Digital Gold” and Highlights Growth of Stablecoins

• Bitcoin recognized as “digital gold” by the US Treasury
• Stablecoins drive demand for short-term Treasuries
• Growth of digital assets attracts institutional interest

The United States Department of the Treasury, in its fourth quarter report for the year fiscal of 2024, highlighted the accelerated growth of Bitcoin, referring to it as “digital gold”. The document emphasizes Bitcoin’s role as a store of value in the universe of decentralized finance (DeFi).

At the time of publication, Bitcoin was trading at $100.054, down 1.2% over the past 24 hours.

The report notes that digital assets, including native cryptocurrencies like Bitcoin and Ethereum, as well as stablecoins, have seen significant growth from modest bases. Specifically, Bitcoin is identified as a store of value in the DeFi ecosystem, with speculative interest playing a major role in its expansion thus far.

In line with this perspective, Federal Reserve Chairman Jerome Powell recently compared Bitcoin to gold, stating that “BTC is a speculative asset that has a closer correlation to gold than to the US dollar.”

The report also charts the evolution of Bitcoin’s market capitalization over the years: in 2015, it was $6,4 million; in 2019, it reached $194 billion; currently, it exceeds $2,3 trillion. Recently, Bitcoin’s price surpassed the $100.000 mark, boosting institutional interest, with more companies considering the cryptocurrency as an asset on their balance sheets.

Additionally, the Treasury Department highlighted the growth of stablecoins, noting that they have played an integral role in facilitating transactions in digital asset markets. Currently, more than 80% of all cryptocurrency transactions use a stablecoin in at least one of the transaction steps. The report estimates that $120 billion in stablecoin collateral is directly invested in U.S. Treasuries. This growth has resulted in a modest increase in demand for short-term Treasuries.

The report also mentions that institutional sponsorship of Bitcoin has been growing in recent years, citing examples such as BlackRock’s ETF and MicroStrategy. Cryptocurrencies have been behaving as “high beta” assets. Furthermore, it predicts that the rapid growth of Bitcoin and other digital assets, coupled with their significant volatility, could lead to future hedging needs and a demand for quality Treasuries.